Asset Based Lending Mortgages

Asset Based Lending- How do asset based loans work?

When you have a big down payment or a lot of cash liquid in the bank you can qualify for an asset based loan.

If you want more info on how these work to purchase real estate or refinance your mortgage call me today.

Asset Based Lenders Look For:

  • Low LTV
  • Big Down Payment
  • Liquid Cash Reserves

Compensating Factors Count

Asset based loans are typically used in lieu of conventional financing because there is a piece missing to qualify for conventional loans.  For example if someone self employed and don’t show much income but they have a lot of assets they can usually get a loan.

The assets in these cases are the equity in the property and liquid reserves cash left over after the down payment.  A lender can determine if their ability to pay can solely rely on the amount of reserves in their accounts.

Types Of Properties:

  • Commercial Properties
  • Residential Properties
  • Single Family Homes
  • Condos
  • Apartment Buildings
  • Office Buildings
  • Strip Retail
  • Multi Family Housing

Missing Pieces, The 4 C’s

With conventional financing the lender’s usually look for what is called the 4 C’s.  The 4 C’s stand for Capacity, Capital, Collateral and Credit.  When one of these 4 items are missing then the lender can rely on the strength of an individual one to make up for the missing one.  In this case assets are the strongest one to cover up other weaknesses.

Do you have all 4?

  • Capacity
  • Capital
  • Collateral
  • Credit

Lenders like a lot of assets and equity in the property because they know they have a lot of ways out if things go bad.  If they need to foreclose then there is equity in the property to get their money back plus interest and attorney fees.  And if you have a lot of liquid assets then that shows financial responsibility and ability to pay the debt for a long time even if you don’t have the income to support the debt.

The Rates And Fees

The terms offered on asset based loans will weigh heavily on the compensating factors of the borrower.  Typically they will be slightly higher than conventional financing but they aren’t too out of line if you are a strong candidate.  They could range from a fee of 1%-3% of the loan amount and rates 5-8% depending on what type of term you choose.

These loans are hand made and lenders will take one at a time to grade them out and offer terms.  If your interested in what kind of rates and fees you will get specifically it’s recommended that you go ahead and apply.  Also these are comparable to hard money loans but usually they are on better terms.

If you want more info about getting an asset based loan then call me today and I will show you your options.

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Reverse Mortgage Explained: How do reverse mortgages work?

Reverse mortgages also called HECM (Home Equity Conversion Mortgages) are government insured mortgages that help senior homeowners over 62 years old get cash equity out of their home.

This is a groundbreaking program and I’ve personally seen it have a positive impact on many senior homeowners lifestyle.

Benefits To Reverse Mortgage:

  • Get lump sum of cash.
  • Get line of credit you can use at later time.
  • Get monthly payments from equity in your home.
  • Maintain title and ownership of your home.
  • Never loose your home due to late mortgage payments to a lender.
  • Zero monthly mortgage payments.

Reverse Mortgage Safeguards

HUD realizes that there is potential abuse that can occur when an elderly person is making an important financial decision.  This is why they have implemented HUD homeownership counseling.  All seniors are required to complete this with a certified counselor before they can officially begin the application process.

The counselor will meet with the borrower and possibly their family to go over all the ins and outs of the mortgage.  They also have mortgage quote documents provided by the loan officer so they can go over all the same numbers with the senior that they see with the loan officer.  With the HUD counseling literally no stone goes unturned when explaining how the program works.

Negative Amortization Payments

One key feature to reverse mortgages are their negative amortization payment structure.  When you have a reverse mortgage you don’t have any mortgage payments to make to the bank.  All you have to do is keep paying your property taxes and home insurance.

The way the mortgage payment is handled is through negative amortization payments.  Basically they add the mortgage payment you would normally pay to the balance of the loan each month.  This is important because it makes your loan amount go up each month.  There is a document provided at time of application called the reverse mortgage amortization table that displays how the negative amortization works over time.

This was originally thought to be a risky feature on forward mortgages during the subprime bubble.  But those mortgages also had high interest rates, prepayment penalties and mortgage payments to be made that would increase over time.  Reverse mortgages don’t have any monthly payment requirement which makes this an acceptable feature.  You can’t loose your home to a lender because you can’t keep up with rising mortgage payments.

Call us today if you want more info about how a reverse mortgage would look for you!  Call me at 847-613-7843.

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How to refinance without getting an appraisal.

Did you know that there are no appraisal refinance mortgage programs available?  Call me if you want more information about how these work.

A no appraisal refi is when a lender either uses the prior value or an AVM value to determine the current value of your home.

Types Of No Appraisal Refi Loans:

  • FHA Streamline Refinance
  • HARP Fannie Mae or Freddie Mac
  • VA Mortgages- IRRRL Program

FHA Streamline No Appraisal Refi

Existing FHA homeowners may be eligible for a streamline refi where they will have no appraisal requirement.  This is beneficial for a few reasons.  First you will save on the cost of paying for an appraisal which can run $350-450.  Second you don’t have to worry about how much your home appraises for.

With these types of loans they pull something called a case number that has the previous value attached to it.  They will use that number instead of a new appraisal.

HARP Fannie and Freddie No Appraisal Refi

These are conventional loans that need to be owned by Fannie or Freddie.  You can use the Fannie Mae or Freddie Mac loan lookup tools to see who owns your mortgage.

These types of refinances allow you to lower the rate or also change the term of your loan without the need for an appraisal.  There are specific date requirements and you should look up your loan here to see if you meet those requirements.

Some HARP mortgage lenders have some limitations on how high they can go on their LTV’s.  You will want to find one that sells loans directly to Fannie and Freddie to reduce the amount of LTV overlays the lender will have.  If a lender sells direct to these agencies there shouldn’t be any LTV overlays applied.

VA Mortgage Refinance With No Appraisal

Similar to FHA insured loans VA allows for a streamline rate reduction refinance.  If you have a VA loan and you have been paying on time it’s worth checking to see if you can lower your interest rate to save some money.  You can also refinance an ARM rate into a fixed rate mortgage for more long term security.

In addition to no appraisal requirement the VA also has relaxed underwriting guidelines for credit scores and assets.  Pretty much if you are paying on time and have decent credit you will have no problem qualifying for the IRRRL program.

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Hard Money Commercial Loans

Hard money loans are often a temporary solution for the means to the end.  They come with higher rates and fees than traditional commercial loans because the borrower has a higher risk profile.

These types of loans are reserved for investment properties.  Hard money helps investors make deals happen that conventional financing can’t touch.

Reasons People Need Hard Money Loans:

  • Previous Bankruptcies
  • Lower Credit Score
  • Property Condition
  • Derogatory Payment History

Borrower Features Lenders Will Require:

  • High Amount Of Equity
  • Liquid Assets
  • High Character

Low Loan To Value = Equity

Loan to value is a key security feature for the lender.  They will typically want a lower LTV better than 60-70% LTV.  If things go bad they need room in the equity to protect their losses.  They will order an appraisal on the subject property and determine the amount of equity the property will have.

Liquid Assets = Cozy Blanket

When a borrower has a lot of liquid assets left over regardless of credit and other risky features that gives the lender a huge sense of security.

If the borrower needs help they will have a back up plan to dip into their assets.  Also if you have a large amount of liquid assets it proves that you make good decisions with your savings behavior.  Lenders know that sometimes people have bad credit or have fallen on bad times but if they are good savers of their money then things will still end up good for the  borrower and thus the lender.

High Character = Good Decisions

The lender will try their best during the interview of the client to determine their character.  In the eyes of a lender character means the client makes good decisions when nobody is looking.  This means telling the truth on their loan application and using the funds for the specific purpose stated to the lender and nothing else.  If there is any hint of deception in any part of the loan application process then the lender will likely deny the borrower for a loan.

Types Of Properties Eligible:

  • Multi Family Housing
  • Investment Properties
  • Commercial and Industrial
  • Warehouse
  • Office Buildings
  • Foreclosure Buyouts
  • Short Payoffs
  • Purchase Investment Property
  • Refinance Commercial Proerty

Hard Money Is Means To The End

Nobody starts out seeking a hard money loan because they usually have higher fees and rate.  But if the deal they are financing is juicy enough then it often makes sense.   For example property flippers.  When using a hard money lender it’s usually the only option other than using a partner to buy a property.  In fact using hard money to flip homes is often cheaper than using a partner.  If you use a partner to acquire properties they usually want 50% of the equity in the deal.  With a hard money loan you have a pre determined rate usually between 8-15% that will cost you less than a partner.

 

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What does a $295,251 per MONTH mortgage payment buy you?

This is a sexy new listing out in Los Angeles CA is listed for $55,000,000.

Time To Meet (more pics): 864 Stradella Rd Los Angeles, CA 90077

If you were to finance this home with 20% down your mortgage payment would be well over $295,000 per month.  In fact this was calculated with just a 20% ($11mil) down payment and a 5% interest rate.  A home of this magnitude would likely require much more down and the financing terms would be less desirable than 30yr fixed conventional financing.  There are special jumbo mortgage loans for deals with larger loan amounts but even this one would be too big for traditional jumbo financing.

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Huge Holding Costs

Even after you buy the home your holding costs with taxes, insurance, utilities and on-site staff would be well over $100,000 additional per month.

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Residential and Commercial Mortgage Broker – Illinois Loan Officer