Real Estate Financing...

In this ever-changing Market, Niche Products are not immune to changes, sometimes overnight.  While this certainly doesn't define the term 'Ideal' ... it is the reality in which we live.  I wanted to take some time to update our Rehab Loans, which are an excellent Financing Source for new and seasoned investors alike.  In Pennsylvania, areas such as Philadelphia, Harrisburg, & Wilkes Barre are just a few ripe places where you can find good deals on properties that are great fits for this product.

So, here are some Frequently Asked Questions about Rehab Loans here in Pennsylvania:

What is a Rehab Loan?

A Rehab Loan is designed to allow an individual to purchase or refinance an existing home and base the loan off of the ARV (after repaired value).  By basing the loan off of the ARV, in most cases, you can include the purchase price or payoff, the cost of repairs, and closing costs.  There is a minimum cash injection that is now required on all Rehab Loans that I'll address in a hot minute.  This loan is perfect for that seasoned investor, first time home buyer or just someone looking to add on or give their current home a face lift that Joan Rivers would envy.  To boot, it does minimize out of pocket expenses.

Can you give me an example of a Rehab Loan based on a purchase?

But of course!  Let's say that you are going to purchase a single family, distressed home for $40,000.  You and your contractor walk through the home and you both decide that it's going to take $30,000 to bring the home up to date and safe for living.  At this point we would give a Licensed Real Estate Appraiser the purchase contract and the bid for cost of repairs.  The appraiser's job will be to give us an ARV (after repair value).  So the appraisal is done and the ARV is $100,000.  Under the guidelines, the maximum can be 80% of that amount which is $80,000.  So far you only need a total of $70,000 ($40,000 for the purchase and $30,000 for the cost to repair) so you have up to $10,000 to use towards closing costs or even more repairs.

How much and what is "cash injection"?

All Rehab Loans now require (at one time they did not) a minimum Cash Injection by the borrower.  This number is figured by taking a set percentage of the total of the purchase price and the cost to repair.  So using the figures on the previous example given, if the purchase price and cost of repairs totals $70,000 and the property will be owner occupied, then the percentage used is 3% which is $2100.  This money is required to be out of pocket and can not be offsetby seller concessions.  If there was a deposit placed on the purchase contract, then that would be deducted, if not it would need to be brought to the closing table.  If the property will be used as an investment, then the required Cash Injection would be 5%.  If the loan amount is over $250,000, then it is a minimum of 10% Cash Injection across the board.

What if I am a contractor & the borrower, can I do my own work?

You can if you are approved through my Investor's Construction Loan Department.  While they aren't the most exciting folks on Planet Earth, they tend to be pretty fair.  There is a required set of documents that must be completed and submitted to the department.  Once they go through and review all of the information, they will render a decision.  If not approved, you must hire a General Contractor or you won't be approved for the loan.  In my experience, applying to be a Self GC should be done as early in the loan process as possible, just in case you are not approved to do so.

What is the criteria that is required to be approved for a Rehab Loan?

There is minimum credit score requirement and there are income requirements.  Currently, the Mid-Score has to be 660.  (Please call or email me for more details on that though).  We do not offer Stated Income Loans on this product so, you must be able to qualify and prove an income.  There are Bank Statement Programs though, where 70% of deposits can be used for personal statements and 50% of deposits can be used for business bank statements.

Is this a Balloon Mortgage like a Construction Loan?

No, the Rehab Loan is an actual mortgage amortized over 25 or 30 years, on a 1 year ARM.  If the property is Owner Occupied then it is amortized over 30 years, Non Owner Occupied is amortized over 25 years.  The loan is repaid by monthly principle and interest payments.

How are the draws structured for the repairs?

On a Rehab loan, the money to repair the home is dispersed by percentage of completion.  This means that once work has been done, then a draw can be ordered and then money will be dispersed according to completion.  My Investor always disperses 10% of the cost of repairs at closing to start the project.  If the total cost of repairs is under $50,000, then there will be three reimbursement draws available for 33%-33%-34%.  If the total cost of repairs is over $50,000, then there will be four draws all at 25% each.  Again, other than the 10% draws at close, all other draws require that work be completed, they are not draws given to do work.

Thank you for joining me here in an updated look at Rehab:-)  There are still great deals to be had, you just got to know who has access to the purse strings to finance them.

Catchy title, right?  I was honored (kind of) when Jeff Belonger asked me to write this review.  One of the best financial tools to sure up our economy has a heck of a lot to do with Mortgages.  I believe the housing industry to be the backbone of our economy.  Real Estate is a pretty big in this world and there's only so much of it.  This has been a wonderful week to cover Mortgage Writings here on Active-Rain.  There have been so many great contributions.  While boring and dry to some, there are many here who do it quite creatively and astutely.  In addition to that, you can learn something very relevant in this world in which we live.  If you take nothing from this and have read this far, the last blog I mention here is ripe...it is the best Mortgage-Related Post I've read in a year or two...

  The Mortgage Consumer Protection Act / My Solution by William J. Archambault Jr. - I hope the governing institutions of Mortgage Brokers & Mortgage Bankers take heed, Bill knows his stuff and has been involved in Real Estate in every shape and form since 1969.  This industry needs more individuals like Bill!

  The Anatomy of a TOP GUN by Janet Guilbault - One of my favorite writers of any kind, Janet writes an E-xcellent piece about a Loan Officer in her office that those who are new or seasoned in the Mortgage Industry...could learn a heck of a lot from.

  What I learned from my VACATION........... by Joe Adams - Besides wanting to join Joe on his hiatus from the 'Working World' ... he does a splendid and insightful job of reflection.  He also seems to have a Great TEAM behind him making his life and YOURS a tad bit easier.

 Conspiracy Theory #17 by Mike Mueller - Mike is probably one of the brightest guys you'll read or talk too.  He's also creative, funny, trendy, & pretty darn handsome:-)  If you haven't subscribed to Mr. Mueller, do yourself a favor and do it.  I would not hesitate to refer my closest friends and immediate family to this guy for anything Mortgage Related.

  Is the referral from your realtor more powerful than someone from the internet?  by Jeff Belonger- Let's face it folks, Jeff doesn't pull punches.  Whether you are a consumer reading up on Mortgages or a REALTOR doing your homework to try to better guide your client, Mr. Belonger is a must read.

  Here's Johnny!  Inflation and the Titantic relationship... by Rich Sweum - If you are inclined to follow a Mortgage Guy anytime soon, Rich is a pretty good start.  He's witty, rational, & knows the Mortgage Biz.  Plus, how can you go wrong with somebody who utilizes a crazed Jack Nicholson photo before taking a glance at our economic situation:-)

 The Question That Messed Up My Old Marketing Strategy! by Lola Audu - "If you take the time to truly get to know those people and learn how to serve them, you will benefit far more than sending tons of useless mailings to people who don't know you and don't care about you."  Yup, that sums it up pretty nicely indeed.

  The Stars Line Up for First Time Homebuyers in California by Janet Guilbault - Yeah, I know...her again:-)  Hey, she's darn good.  She's that darn good:-)

  Paperless Appraisals by Sara Goodwin - If you want some insight into the Appraisal Process, reading Sara Goodwin is a great place to start.   In this article, she cites the very streamlined way that appraisals are delivered these days. 

  Rate Shoppers by Jon Zigler -  A good article for consumers and Realtors who ask the infamous question when trying to get a Mortgage, "What's your Rate?"  Jon give concise insight to some of the factors that decide how much the money will cost that you are looking to borrow.

  Looking for an Edge: Is Your Name Engraved on the Championship Cup?  by Andrew Lenza - If you want to read about a lesson in ethics, click on this article.  If you want to read the best damn writer on this site in my view.....read Mr. Andrew Lenza!

  IMPROVE Your Credit Score!!!!! by Ann Sabbagh -  This is a brief tutorial on how to better your credit score, reading Ann's post will give you a solid start.  While the FHA & VA aren't as credit score driven as other traditional programs, I dare state that the status of your credit score will continually affect your financial future of utilizing other people's money.

 Mortgage Transparency Kills Mortage Service:  Will the Mortgage Industry's Commoditization Follow That of the Airlines?  by Robert D. Ashby - In my opinion, probably one of the best, if not the best, Mortgage Related Article I've read to date.

The next 4 lucky contestants members : 

1.      Rich Sweum         04/21/2008    through    04/27/2008

2.      Janet Guilbault    04/28/2008    through    05/04/2008

3.      Matt Freeman     05/05/2008    through    05/11/2008

4.      Aaron Gordon     05/12/2008    through    05/18/2008

Mortgage blogs by loan officers   Here is a list of Loan Officers.  If you are not listed, please email Jeff Belonger to be added. This way the person doing the Mortgage Pro week in reviewcan try and find most mortgage related posts in one section. ActiveRain is growing rapidly and it is difficult to keep up.... If you think you have been ignored, you have not. This is open to all!!!

All About Mortgages/Mortgage Networking   Here is a group that many loan officers post their mortgage related blogs in.  A good place to learn more about the type of programs, new industry news, and sometimes some inside tips. Don't hesitate to join.

MORTGAGE PRO Week in Review    A repository for the Mortgage Week in Review.  Please don't hesitate in joining this group. And any volunteers for the mortgage week in review, please e-mail Jeff Belonger at   jbelonger@ihmci.com

(If you are still actively reading, thank you!  If you haven't checked out the posts I've put forth...shame on you:-)  It should be noted that the following is 'Legal Jargon' saying that it isn't a good idea to copy this post word for word.  Here's a hint, if you do....at least mix it up a bit.  Confuse Google and other search engines by adding your own innovative spin on anything and everything.  Stealing ideas and words isn't cool, in the end you are better off using your own....)

There will be no recreations of any type regarding the titles or content of this group or Review without the permission and expressed written consent of the Group's founder- Copyright 2008^© 

Since day one, I've heard the ramblings, the rumors, the news & the views, that Banks wanted and want to put Mortgage Brokers out of commission (no pun intended).  I've alway taken it a bit personally, since it's my livelihood and all.  The arguments tend to be the same, that Banks have the control and us little Mortgage Brokers have no stroke.  We are simply middlemen who do nothing more than pass along information and extend our arms out with an open hand waiting for a check to grace our awaiting palm.  Shoot, if that's the case, I've done this job all wrong for way too long.

Years back, our local paper here in Allentown touted Mortgage Brokers as the next best thing since Cable Television.  We were largely responsible for helping to put people in homes who otherwise may not be given that opportunity.  More recent articles show a slight slant on that view, as now we are deemed Satan's Spawn, a widely corrupt group of gibrones who took advantage of people for a quick buck or two.

Well, in my assessment, there were plenty of yahoos that were in it for the quick buck and who were as corrupt as Al Capone on his worst day.  Seems to me that it is the nature of any Industry that is 'hot' and perceived as potentially lucrative.  And those folks are out....for the most part.  I've seen it with my own two eyes, heard it with my own two ears, witnessed it in every shape and form.  The bad apples aren't all gone, nor will they ever be...in any Industry or in this World in which we live.  Yet, they've been weeded out and most of what is left is the very core of individuals who are in this for the very reasons I am, to help and to earn.  Yup, to help and earn.  I had always dreamed of doing something for a living that entailed me being able to help people while earning enough to live comfortably in Capitalistic America.  Before me is that very something and now I hear they want to take it away...

I'm not too conscious about word counts or how long a post is so if this becomes too long, forgive me in advance.  For now, I begin a tangent, not of why I was born or why I live...but of why I do what I do for a living. 

To be honest, I didn't realize why I am doing this until everything hit the proverbial fan...in Real Estate & our Economy.  While it was never a 9-5 job or something to do just to garner a paycheck, I wasn't really in tune of why I chose this, or this....ME.

And then it hit me, like two tons of bricks on my weary skull, I realized why I am a Mortgage Broker and why I am pretty damn proud to be one.  I can feed your head with information, with knowledge, with education, with what goes on the 'Inside' even though I'm labeled as being on the 'Outside'.  I'm Corporate America's Black Sheep.  I'm palm-pressing with the Big Boys as a Representative to the majority who aren't.  While I won't fill your mind with 'I represent the common man' jargon, I can say that I represent two things.....Humanity & Compassion.  That ain't jargon folks, that's being a human being and pretty much knowing I'm in this with all of you.....I can only use my position to make your travels a tad bit easier in this life.   Quite frankly, it makes my travels easier as well. That's my position and I'm sticking to it.

For all the Major Banks & Mortgage Bankers out there in Cyber-Land, I wish you no ill-will.  If you truly want to put us out of business in this dog eat dog world, do your thing.  I don't get my business from large billboards, 30 second commercials, or pop-ups when you log on to the Internet.  My marketing dollars aren't passed on to potential clients.  I'm a tad smaller than all that.  The loan I closed for Joe does something similar and is less pricey.  Joe talked to Sally and Sally came to me.  Sally talked to Bill and I closed his loan as well.  I'll market cheap and I'll compete.   Your existence makes mine stronger.  Your competition makes me better.   I dare say that mine does the same for all of you. The bottom line to all that, better service and product for those around us.  That should, in realistic theory, make all of our lives easier & I will advocate that to my dying day...

Are Mortgage Brokers The Enemy?  For the consumer....I dare say, "NO!"  

We are simply one of the advocates they need on their side....

This post will hopefully prove to be helpful information on two fronts.  First, this is really good news for Real Estate Investors who for whatever reason have a hard time documenting their income.  Second, I'm going to throw a bone out to other Mortgage Folks out there as to a Niche Investor that can place some loans that you may have a difficult time in placing.

This is a reminder that I am still doing Stated Income on Investment Properties.  There is no seasoning requirements for this product.  This will come in especially handy for folks who have been buying properties with cash or rehabbing them who want to turn around and take cash-out immediately.

ATTENTION REAL ESTATE INVESTORS!

SISA (Stated Income, Stated Asset): We can finance you up to 75% cash-out of the appraised value with a 700 score.  If you simply want to do a rate/term refinance or purchase another investment property, they will go to 75% LTV with 680 scores or higher.

SIVA (Stated Income with Verifiable Assets...6 months PITI reserves required):  PITI reserves mean 6 months of your principal & interest payment on your mortgage along with the taxes and homeowner's insurance.  An example is if your Principal & Interest mortgage payment is $800.00, your real estate taxes are $150/month and your homeowner's insurance is $50.00/month.  So, your total PITI (not to be confused with Pity;-) is $1000.00.  You would need at least $6,000.00 in reserves in the bank or in a retirement or investment account.  With this product, we can do a no-seasoning cash-out refinance down to a 680 score.

Sure, the LTV's are low but there are property investors out there looking to capitalize on the soft housing market in some areas and may need liquidity from their non-liquid assets to take full advantage of current market conditions.

And for all you Mortgage Folks out there, my rep for this Investor is relatively new to Active-Rain.  Her name is Beth Forbes and I've known her for 7 years, since I came to the Lehigh Valley.  If you click here, you will be sent to her AR Profile and also have her contact info.  They can do loans in many states so give her a shout and check out her blog.  And if she has any negative things to say about little old me, she's probably right ;-)

Jason Sardi

Mortgage Consultant

First Choice Equity Group Inc.

610-439-2166 ext. 229

jsardi@fcegi.com

One of my favorite television programs of all-time was & is 'The Wonder Years.'  It was nostalgic, poetic, unique, a tad humorous, & pretty darn identifiable....at least in my eyes.  If memory serves me well, it also included a line that changed my wave of thinking, one that if practiced, may even change my life.  I believe the scene involved Ben Stein playing the teacher and a young Fred Savage playing the student.  Mr. Savage (Arnold) was having some difficulty in math, I think he may have even tried to cheat in that episode.  Yet, the words I remember coming from Ben Stein's character remain a very philosophical and I dare say enlightened way of looking at things.  The line is simply, "Every problem contains its own solution."  Wow, chew on that for a bit:-)

It reminds me time and again of the world we live in.  There are problems going on with our Economy, the Real Estate Industry, our Media, the lousy Top 40 music blasted by major Radio Stations, and any other fiber of what goes on in our lives.   There will always be problems.  It's like that whole 'death' thing....inevitable.

For my initial 31 years on Mother Earth, I've felt that I've been missing something.  Perhaps I could lend a hand in at least making things better, in some way or another.  Back before puberty slapped me in the face, I wanted to be a dentist.  Then, I saw Larry Bird perform and thought I could be the next Kurt Ramsey.  Soon after, I decided since I liked to write interesting prose, perhaps I could be the next Jim Morrison and elevate myself above 'The Lizard King' to live out my life until I was at least 30 years of age.  Then I reached my College Years (going in majoring in accounting) and found the curriculum offered to be about as interesting as a sit down interview with Fred Rodgers after a lobotomy.  It was then that I made the decision to major in Psychology & minor in Philosophy.  I was bound and determine to sit on a mountain top and hand out Lithium like rice at a wedding, like condoms at Hedonism, like featured posts on Active 'Freaking' Rain:-)  But no, that's not me.  After graduation, I started to train.  Twenty-five push-ups and then fifty, then one hundred in 60 seconds.  That's when I came to Allentown, Pennsylvania.  I decided to try to instill a sense of respect into the Professional Wrestling Industry by training under the Wild Samoans and being an orator who made sense and got attention.  Long story there...which perhaps I'll get into sometime down the road.

Then I entered the Mortgage Industry and found an arena where I can truly make a difference.  Not that you can't in the professions I listed above, but this seemed like a better fit for me.  I remember helping my first couple get a Mortgage to buy their first home and after the closing I walked back to my office and thought to myself, "Holy crap, I just helped someone buy their first home...helped them live the American Dream."  That's not just cool, that's an honor.

And now they tell me that this Economy & this Real Estate Profession I got into ..... is in a bad way.  Heck, that's ok with me.  If that's really the case...we are a spoiled bunch, no?   I'll scratch the back of my head from time to time but I will never forget how to help, through my own meager contribution. 

What got us into this situation, at least in my mind, is Greed.  Greed is the disease.  The greed for money...for more, more, more!  It starts at the top and works its way down.  Now we need to find a cure.  I won't point fingers because everyone is ducking anyhow.  I will say though that the problem we have does contain its own solution.  The problem is Greed, the solution is Greed....only of a different kind.  The very cure to the very disease is Greed, it reminds me of a Flu Shot.  You clone the virus itself, kill it, then inject it into the body....allowing the immune system to attack it and build up its own resistance to the flu.  Our Greed to help, to service, to educate, to do a large volume of business, to out-perform and out-market ... the Greed for exposure to as many as possible.  It is this very Greed that will help cure, this very Greed that will help turn around the very Industry whose Greed for Money helped put us to where we are at this very moment.  Get Greedy folks, people need us now more than ever...

Here's a little FYI on the SBA so if you have any questions call me A.S.A.P:-)

Welcome to a brief insight about SBA Lending, through the eyes of my investors.  The Small Business Administration helps individuals purchase or grow small businesses which can help the growth of communities and revamp the local economy.  We all know that we could sure use a bit more of that going round.  I was excited when we partnered up awhile back with our Investors to be able to provide this service to our past, present, & future clients.  Plus, it's a good thing to be able to help the growth of local communities by providing financing for businesses of many types and sizes.

We have been partnered with one of America's leading providers of US Small Business Administration (SBA) Guaranteed Loans that proudly hold National Preferred SBA Lender status.  Together, we have established a pretty rich history of working with small businesses and our SBA Lending Program reflects our commitment to entrepreneurs.  Hey, that's the backbone of what has made capitalism cool work.....small business!

Conveniently located right smack dab in the Lehigh Valley, we deal with Investors who are experienced community lenders and take the time to understand your lending needs. First Choice Equity Group Inc. offers an array of credit products that can be customized to fit your business goals, whether you are a current business owner or want to start up one.

What forms of business are eligible for SBA financing?

Proprietors, partnerships, corporations, and limited liability corporations are eligible for SBA financing.

What forms of business are not eligible for SBA financing?

The types of businesses that are never eligible for SBA financing are businesses that involve the following:

·         Speculation

·         Lending or investing

·         Religious group

·         Non-profit group

·         Monopoly

·         Illegal activity

·         Persons on probation or parole

(They say never say never, so perhaps I should just say....not right now:-)

What type of financing is available?

The SBA will provide financing for businesses to purchase, expand, or construct business real estate. Purchases of machinery, equipment, and inventory are also funded through the SBA. In some instances, the SBA will help finance working capital, seasonal lines of credit, contract lines and/or working capital lines.  Further, the SBA may allow financing to business owners to repay existing outstanding short-term credit or unfavorable term debts. Heck, there's a whole lot that the SBA can do that can help people become or continue to grow their small business.

What schedule is available for paybacks?

The typical SBA terms as of now are:

·         Real estate                              -      25 years

·         Equipment, machinery, furniture, fixtures      -      15 years (depending on useful life)

·         Working capital                       -      07 years

What information is required to apply for an SBA loan?

1.    Last three years of personal tax returns on all owners (of 20% or more).

2.    Last three years of all business tax returns (if in business that long).

3.    Last three years of accountant prepared financial statements, if available.

4.    Interim financial information, no older than 90 days, including a balance sheet
and profit and loss statement (may be internally prepared).

5.    Brief narrative on the business, including a list of requested use of proceeds.

6.    Bio/resume on all principals.

    If a start-up (less than two years' tax returns), a full business plan must be
submitted, including three years' cash flow projections, three years' projected
profit and loss statements, and a projected start up balance sheet.*    

This is a great lending tool for small businesses folks!  Take advantage of it and grow your business...and our economy.