By Theodore Hansson
In a recent article in the American Banker magazine residential home loans are off, while commercial lending is still going strong according to the article. This is good news for us.
Also, in a recent report by The Federal Reserve Bank of New York, it indicated that a quarter of the lenders that it surveyed reported tightening overall credit standards, while none of the banks surveyed had eased standards. Also, good news for us.
Even with a possible slow-down in the economy and tightening of traditional bank financing, there will always be a market for non-traditional commercial loans. These loans are what we refer to as bank turndowns.
Also, there is a lot less competition in this kind of lending and because of the higher risk involved, our commissions (points) will be greater.
Several of you have asked about lending on residential real estate. We don't do traditional residential loans because of several factors, some of which are:
- generally the lender needs to have an office in the state they do business.
- there's a lot more competition compared to commercial lending;
- the points (in which your commission is included) are a lot lower.
However, with all that said, we still do what's called jumbo financing on residential real estate.
Loan Programs for Jumbo Financing On Residential Homes
Here are the guidelines on these residential jumbo loans:
Homes can be traditional SFR (single family residential) , Condos, and Town homes. They can be primary residence or second homes
The minimum loan is $500,000 while the maximum is $7 million.
Loans are underwritten under commercial type guidelines. Which means that these loans do not have to qualify to end up going into some residential securitization pool going to Wall Street.
Also, A-B-C or D credit will be considered. Prior discharged bankruptcies or foreclosures are OK.
Minimum LTV's (loan-to-value) between 50% to 75% depending on the circumstances. These jumbo loans can be for either new purchase, construction, refinance, or refinance with cash pulled out by the borrower.
On a purchase, the borrower must show a minimum of 10% real cash down. Also no tax return (1040 form) income verification is OK.
However, the borrower must show ability to repay via cash flow through checking account or his or her deposits over last 6-12 months.
We'll also allow the borrower to do what's called "cross collateralize" with CD s, stocks, other real estate, boats, etc.
We also have several different ways for the borrower to structure the loan. For example we'll offer a fixed rate or an arm (adjustable rate mortgage) rate with interest only. Or a 30 year arm rate with a 2 to 5 year call or a straight 15-20-25 year loan.
Basically the interest rates on these jumbo loans will range from the low end of 10% to high end of 16% depending on the strength of the borrower as well as the characteristics and the location of the property etc.
Origination points on these loans range from 2 to 8 points, depending on the risk factor.
About The Author
|Theodore Hansson of Theodore Hansson Co. Theodore has helped 1000's of ordinary people succeed in their own home-based business, brokering loans. Visit him at http://www.thansson.com for FREE "how-to" information as well as a free subscription to his newsletter "Loan Brokering Tips & Tricks".|
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