Over the past 18 months or so, maybe longer, the mortgage origination industry has seen significant change. Most of our competition is gone, but so are the programs and lenders that provided so much of the money homeowners and homebuyers needed. With those programs gone, we originators are left to re-tool our kit and get out there and keep originating - or quit, I guess.

For me, when it came to re-tooling, I tried everything, and as I became comfortable - there was change. Whether the sources dried up, or underwriting guidelines tightened - whatever it was it seemed like I was constantly re-tooling - and my volume of production slipped by 80%! Because I have been doing this since the late 80’s - I simply had to find a new niche, a new way to grow my business and support my family. What was I going to do?!

When I started in this business, back with thermal paper fax machines (anybody remember those?!), there were really only 2 kinds of loan programs, government or Savings and Loan money. I stayed away from the government stuff, heard it was too hard and took too long and the government limited origination fees to just 1%, so I stayed with the S&L stuff. Now, with S&L’s gone and WallStreet money still not back yet - seems like the old days are here again - with the major focus on FHA loans!

I have seen statistics that expectations for FHA are in the range of growth near 1000% - seems as thought this time, I am not going to miss this wave! So, I read all I could, I even purchased some great training and reference manuals to ensure my understanding - and then I went out to originate. Although the learning curve was steep, I am now back to production levels I haven’t seen since the refinance boom of 5-7years ago. Although the numbers are similar, the revenue is not! Yes, it is true that origination fees are limited, but to encourage the use of these products, seems that YSP (yield spread premium) is what will fuel the economics of this new wave of FHA loan production.

Don’t miss it this time, learn all you can - the guidelines are strict - but with the millions of homeowners needing help our of those payment option arm, and high rate subprime loans pending their next adjustment - there is quite a demand for our services. Remember, there will always be a need for home loans, we as mortgage professionals just need to be ahead of the curve and ride the different waves of the market to serve our clients and earn our living - don’t quit, just do your homework, and ride this FHA wave!

Anyone who is in this business and is not making FHA loans, should learn how to get yourself or your company FHA approved.

To learn how, Download this: How to Get a FHA License

Posted by admin | No Comments »

Traditional bank and institutional lending has become outdated in some respects and does not always meet the needs of potential commercial customers. Private investor funding has filled many of the gaps while making investing easier and profitable for all parties involved. Although private funding is not actually lending by definition it is still a highly viable alternative.

The typical traditional bank loans take 3 to 6 months to close. The obvious constraint is if your deal needs to close before 3 months or if the seller is anxious to close in a fast time frame. Private funding typically takes 30-90 days to close and the right mix of information, opportunity and right-time-right-place has seen private deals close in a manner of days!

Most commercial lenders have very specific guidelines on documentation of the source of income or proof of asset ownership. Obtaining these documents from the current owner(s) is a big challenge if not impossible. Tax returns and additional personal information are sought but few are willing to open up their finances to just anyone. Private investors tend not to look at past performance of the property but seek a good analysis of what the future potential is. Be prepared with a sound business plan!

Many borrowers cant qualify for traditional commercial loans if they have existing high business expenses. Again, existing financials need to be examined by the bank to determine if prior performance indicates worthiness for the loan. This time its your financials under the microscope. This type of information is useful in proving yourself to private investors but not required.

Special business properties such as mobile home parks, restaurant /bars, cash businesses, new development construction projects, nursing homes, assisted living centers, etc. may be outside of the traditional lenders interest. The reasons differ but are often related to the perceived risk or lack of knowledge about the type of investment. Again, private investors are more interested in your plan and its soundness rather than the category of property.

Relative short balloon payments on special purpose business loans are fairly common with traditional loans, some due in as little a 3 years. If your business plan does not specifically show how returns on the profitability of the property will support the balloon payment the loan is often denied. Private funding may also have balloon payments but you can always seek a different structure that fits your needs and plan rather than trying to plug your plan into an institutions way of doing things.

Assumability of the loan is not often offered with commercial loans. If your plan for the property includes later selling it for a profit you need to consider how potential buyers will finance the purchase from you. If you cannot transfer the loan to a qualified buyer you will be at the mercy of them obtaining a loan from an institution and meeting all of their requirements. This is time consuming and costly for the borrower creating a delay in you moving on. Conversely, private funding can often be structured so that you may transfer your existing agreement to another without any of the constraints.

Banks and lending institutions often monitor their investments by requiring ongoing financial reporting requirements. Although they are not a partner in your venture they behave like they are. Until you break free from the loan this monitoring relationship will continue. Private funding investors may also require periodic financial reports but as long as the agreed terms of the funding are being met they may have little interest.

Some institutional lenders still require the borrower to live in the same state as the property. In todays realm the reasons for this requirement are lost. Legal issues may be a bit easier to deal with because of the requirement but not enough to limit the borrowers to properties in their own state.

There are many more differences between traditional loans and private funding. The differences usually favor the non-traditional private funding world. You may pay slight more for private funding overall but if you cant qualify for a traditional loan, or the timing will not work you should not even consider cost when comparing the two options.

Posted by admin | No Comments »

Fierce competition among mortgage lenders in recent years has brought great news for consumers - Banks and companies scrapping of the companies has only led to a greater depth of choice and value for almost every type of borrower, from those who seek to obtain a mortgage for the first time through those looking to remortgage their existing one.

In today’s market, the traditional one size fits all type of mortgage has long disappeared - the borrowers now have individual needs and goals, not to mention the history of credit, too! It is true that, regardless of their credit history or personal circumstances, there are mortgage products to fit almost any type of borrower.

If your mortgage requirements are less than conventional, you may experience difficulty in obtaining mortgage financing through the usual channels, by way of approaching the High Street banks and companies.

High Street lenders have been the traditional preserve of the borrowers with impeccable credit records - many of these lenders will be very eager to deviate from their ideal customer profile. In many cases where a borrower has a blemished credit history, an initial computerized credit scoring system will result in a denial.

There is a now a huge selection of specialist / sub-prime mortgage lenders, many of whom who are willing to consider most types of mortgage application - those with the worst records of credit, the self-employed workers borrowers with little or no proof of income.

In many cases, borrowers are being redirected to the world the loan specialist after being rejected by a High Street bank or building society for whatever reason. These types of specialized lenders, once considered a niche market, have become widely recognized throughout the mortgage industry and the rise of providing an important role.

Many specialists / mortgage lenders will only be accessible through an intermediary, such as a mortgage broker, independent financial adviser or mortgage network - Customers must first go through these channels, in order to access many of these products to mortgage lenders.

Self-employed mortgages

Employed borrowers have always been treated differently from their counterparts employees. They have always been penalized for their status in the past, usually in the form of higher interest rates, or an interest rate of freight. Self-employed borrowers are still perceived by many banks and corporations as a greater credit risk unless you are able to provide backup of their income in the form of two or three years’ accounts and six months of account statements bank.

There are many specialist lenders who recognize the enormous volume of self-employed persons in the labor force, well over four million and, therefore, make greater efforts in accommodating the needs of these people loans. They can not offer the lowest rates in the market, though their mortgages are still competitively priced and can offer greater flexibility too.

Buy to Let mortgages

Remortgage to buy products that have long been the preserve of the specialist lender. The purchase to let the market has attracted a large number of owners in recent years as the escalation in housing prices and greater need for investment in low-risk property has a very viable option in which to invest in.

Many major lenders have jumped on the purchase of car for that however it is worth bearing in mind that specialized lenders often have more experience of buying for the market.

Approaching a mortgage broker can be a great place to start in the investigation of its specialist lending needs. As mentioned above many of the leading specialized lenders are available only through an intermediary, however, the majority of mortgage brokers have access to a wide variety of different lenders.

A mortgage agent may charge a fee for services there, however, this can sometimes be negotiated in the light of the fact that most also receive a commission on the conduct of mortgage lender for its implementation.

You also notice when doing their research that most of the specialized lenders are in fact lending arms of major banks and major building societies.

Posted by pooch | No Comments »