5 Reasons You Might Need To Consider Non-Traditional Financing

Private Money financing refers to loans collateralized by real estate, where the source of the funds used to close Real Estate transactions come from private investors.

The decision by the investors to make a loan is based primarily upon plenty of equity in the real property securing the loan thus reducing the risk of loss.

The ability to repay, and the borrower’s character is also considered along with how the borrower will pay the investor back in time.

Private Money loans are needed when a borrower or a property falls outside the standard underwriting rules of conventional lending sources like banks or other lending institutions.

The Primary Decision For Private Money Is Typically Based On The Simple ThreeFour Cs Of Private Money Lending:

  1. Capacity to repay the loan back
  2. Credit/Character of the borrower
  3. Collateral or property type

With risk of loss lessened, a loan may be a sensible deal from the Private Money Lender’s point of view, but it remains discarded to institutional lenders. To meet the continuing financing needs of these borrowers, an ongoing demand for private money has been created.

Mortgage brokers and bankers solicit and process these types of loans but the private investors are the ones that underwrite and close these private money loans.

After a loan request is processed and underwritten, the loan is funded by a loan investment product arranged by a Private Money Specialist. Private investments may come from individuals, entities, or pension funds. Your private money investor or a private servicing company will service each loan until it is paid off or the property is sold.

The Reason Why People Need Private Money:

1. Loss of bank loans, including denial due to:

• Use of cash out

• Not perfect credit

• Needing stabilized income

• No reserves

• Not operating with a bank account

• Debt ratios to high

• Property type or condition

• Borrower type (i.e. trusts)

2. Borrower’s election to avoid the excessive loan conditions of an institutional loan saving time

3. Private Money Lenders ability to arrange loans secured by property types unacceptable to Institutional lenders

4. Borrower’s circumstances make it difficult to obtain institutional loans

5. Property’s characteristics make it difficult to obtain an institutional loan

If any of these scenarios sound familiar to you or you need more information about Private Money Loans contact me directly and I will help answer questions about Private Money loans.

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Know Your Real Estate Disclosure Laws Before You Sell Your Home

 

When deciding to sell a piece of Maine real estate, there are certain things you must disclose about the property to the buyer before the sale can go through.

Disclosure laws are put in place to protect the buyer from unknowingly purchasing defective property. Not disclosing certain information about the property can jeopardize the sale, or worse, invite a lawsuit.

This has become more of an issue lately as some sellers are tempted to gloss over deficiencies in the home they are selling in order to try to get a higher sales price.  In fact, a recent poll of real estate agents showed that 75% of agents ranked non-disclosure among the “top three current and future issues.”

What You May Need To Disclose

The main items that need to be disclosed are any defects with the home. This includes, but is not limited to, plumbing problems, water leaks, cracks in the foundation, insect infestations and toxic materials in the home — such as lead, asbestos, carbon monoxide or mold.

Be sure to fully disclose anything that may be pertinent to the buyer before purchase. Some disclosure laws include reporting issues with neighbors and whether the home has a criminal or notorious past.

If you are unsure about some information regarding your real estate, one option would be to state that you do not know that specific information. Remember though, if you knowingly withhold information, it may cause the sale to fall through or could be used against you in a lawsuit.

Does It Make Sense To Have A Pre-Inspection Done?

Sellers can also have their home inspected prior to placing the property on the market to prevent any surprises of unknown problems with the home. This way, defects can be fixed before listing the property, and the disclosure form can state the problem has been fixed. Buyers will almost surely want an inspection prior to closing, and a pre-inspection may suffice.

Disclosing information does not mean the seller needs to fix the problem. Any disclosed problems with the real estate can become a negotiation point. Remember, the most important thing is to be honest about any known issues with the property.

Real estate disclosure laws may be different depending on the state in which you live. The best way to know what you need to disclose in your area is to check with your trusted real estate agent or property attorney and discuss any potential property issues with them before you fill out the seller disclosure form.

3 Tips To Sidestep These Common FHA Loan Hang-ups

FHA loans are becoming increasingly popular these days as potential homeowners are not able to qualify for mortgages from traditional lenders. The FHA insures these high-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, getting through the loan process with the FHA is more difficult than with a traditional lender, and you may need to cope with some of these common loan hang-ups.

Property Condition

You can’t buy just any property with a FHA loan. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. If the home has chipping paint, a leaky roof, or a wobbly banister, the financing could fall through.

Sometimes you can get the seller to make the needed repairs to pass inspection, but in other cases, you may have to go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 over the purchase price of the home for repairs and updates. It’s important to check with your local mortgage lender to determine any specific local FHA 203k loan details.

Low Appraisal

In addition to inspecting the property, appraisers also estimate its market value. These estimates are based on the property’s features and a comparison to similar properties that have sold recently. If the appraisal is low, the FHA loan funding could fall through because the FHA will not let you borrow more than the home’s appraised value.

Rather than trying to scrape together a bigger down payment, just take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income.

Often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments. For more information on common FHA loan hang-ups feel free to contact your trusted mortgage professional today.

Reasons Why You Should Consider Refinancing Your Mortgage

Refinancing a mortgage is a golden opportunity to lock in today’s low interest rate for the next 15 or 30 years. While interest rates now are still low, there’s a good chance they will be heading up in the coming months.

The Fed won’t maintain the current bond purchasing level forever, and just as rates spiked when the Fed hinted the bond purchasing would change, rates will spike even more when purchasing levels actually do change.

As interest rates remain very low for 30-year and 15-year mortgages, homeowners can benefit greatly from a refinance. Several types of people in particular should consider refinancing.

Carrying A High Rate

Anyone with an interest rate well above today’s level should think about a refinance. Unless the homeowner is planning to sell within the next few years, a refinance will almost always save money in the long run if the rate can be lowered by at least a percent.

Switching From FHA To Conventional

Given that FHA mortgages now carry mortgage insurance premiums for the life of the loan, it makes a lot of sense for borrowers to switch away from them when they can. Refinancing may be possible once the homeowner has built up enough equity to qualify for a mortgage from a traditional lender, without the burden of mortgage insurance.

ARM Coming Up On Adjustment

The low rate of an adjustable rate mortgage sticks only for the first few years of the mortgage. After this point, the rate adjusts each year based on market trends.

Rather than paying the adjusted rate, which is almost always higher, homeowners can refinance into a new fixed rate mortgage to lock in one of today’s low fixed rates for the duration of the mortgage.

Cash Out To Consolidate Debt

Homeowners carrying high-interest debt, like credit cards and personal loans, can often benefit from consolidating it into their mortgage. As long as they maintain at least 20 percent equity in their home, they can get a cash-out refinance for an amount higher than their current mortgage balance.

They can then use the difference to pay off high-interest debt. For more information about refinancing your mortgage feel free to contact your trusted mortgage professional.

4 Tips To Save For That Down Payment

In order to save up a huge amount of cash for the down payment on your first mortgage, you need a solid savings plan!

When you take out a mortgage on your new home as a first time homebuyer, the more you can pay as a down payment the better. The down payment on a mortgage reduces the principle of the loan and means that you will be paying tens of thousands less in interest payments over the life of the loan.

Most financial experts recommend that you should save up at least 20% of the value of the home as a down payment. Depending on the value of the home that you want to buy, this can be a serious chunk of money.

The conventional saving tricks of skipping your morning latte and eating dinner at home just aren’t going to cut it when saving up this much money! You will need some strategies for saving big.

Here are some tips to help you get closer to that down payment:

Make A Separate Savings Account

No matter how much you have already saved for your down payment, create a new savings account to put the money in. When the money is in your personal account it is so much more tempting to spend it on day to day expenses. Also, a savings account will give you a better rate of interest so that you can help you money grow.

Pay Off Your Credit Cards First

If you have credit card debt, you will be paying interest charges to the credit card company every month. These charges can really add up, especially if you are only paying the minimum on your loans. If you can pay down this debt you will have extra money every month to put into your savings instead.

Get A Part-Time Job

If you want to accelerate yourself towards having your down payment saved up, you could consider taking on a part-time job in addition to your full-time job on a few evenings and weekends.

It doesn’t have to be something that you do forever, but even sticking with it for six months to a year will give you thousands in extra income that you can put straight towards your down payment.

Make A Backwards Budget

Do you find that after you have paid all of your bills and your living expenses, there is nothing left over to save? Rather than calculating all of the money that you use on your monthly expenses and then saving whatever is left afterwards, why not make your budget the other way around?

Start off with how much you want to be able to save per month then subtract that amount from your net income. The number you have left is what you have to live off.

You will find that you naturally change your habits to make this amount of money work for you and if it if not enough you can increase your income by getting a side gig. These are just a few ways that you can save up for a down payment on your first home in order to save money over the years on your mortgage.

Flaws You Cannot Hide By Staging Your Home

When you sell your home, you want it look as good as possible. To do this, your real estate agent will help you stage your home or, if needed, help you find a professional to stage your home.

This means de-cluttering your home, re-arranging furniture, and de-personalizing each room.

A staged home is more appealing to buyers and helps to highlight your home’s positive features. However, staging is not meant to cover major flaws in your home. Some things just have to be repaired.

Roof Problems

It doesn’t matter how pretty your home is, your buyer is going to expect you to fix roof problems or adjust your price to cover them. Your roof is one of the most important parts of your home.

Cracked Tile

Of course, you can use throw rugs to cover cracks in your tile, but chances are your buyers are going to look under them. Then they may think you are trying to hide a serious problem like a shifting foundation. Save yourself the headache and have your floors fixed.

Broken Windows

You have to expect your buyers to walk around your home checking out the views from the windows. They’re going to notice any cracks. If you have the budget, consider upgrading your windows and making your home more marketable. At the very least, you should have the glass replaced.

Torn Screens

If you have torn screens, your buyers may think you don’t take care of your property. Yet, screens are fairly easy to fix on your own. With the right supplies from your local hardware store, you can have new, sleek screens in less than a day.

How A Mortgage Pre-Approval Can Help You Get A Better Deal On Your Home Purchase

Oftentimes, when you are searching for a new home, it may seem obtaining a pre-approval for your mortgage loan is a waste of time and energy. However, there are some significant benefits to a pre-approval which should not be overlooked.

In many cases, buyers can use a pre-approval for leverage when negotiating with sellers and may wind up buying a home for far less than what the listed price is.

Knowing Your Limitations

One significant benefit of a mortgage pre-approval is knowing exactly how much money you will be able to borrow. This means you will be looking at homes you know you can afford.

Whether you are working on your own or you’ve sought the assistance of a real estate broker, there will be no question in your mind how much money you can spend.

Approaching A Seller

When someone is attempting to sell a home, chances are they are either buying a new home or they are relocating. This means they may be facing certain time constraints which can be difficult when they list their home.

When sellers are faced with multiple offers, chances are the potential buyer who has a pre-approval will often be the offer that is accepted, even if it’s slightly lower than other buyers.

Benefits For The Seller

It may seem the seller has nothing to gain if they are taking less money for their home simply because you have a pre-approval. However, this is typically not the case.

Keep in mind the usual process is the buyer makes an offer, they search for a loan and they may eventually get turned down for a mortgage. This means the seller has to start the process all over again; typically 30 to 60 days after they received the first offer.

A pre-approval can give you a great deal of negotiating power simply because your lender has already validated your credit information, your employment, debt and income.

This means when you begin negotiating with a seller, the time from signing a purchase and sale agreement to closing your loan is typically significantly shortened.