The following is an excerpt from my latest E-Book, The Help-U-Buy Way: The Retail Sales Strategies You Need to Succeed In Any Market. For you FREE copy email me at Chris@RealEstate2.com or visit me on Facebook. www.facebook.com/TheMcAllisterTeam
Choosing and Working With a Lending Partner
One of the most important things to look for in a lending partner is someone who understands that most of your referrals will not qualify for a traditional mortgage right away. Many if not most lenders will see your referrals as waste of time. You need a partner who sees the value, and gets a degree of satisfaction, from putting someone in the house of their dreams - regardless of how long it takes.
They have to understand that these will be some of their most grateful clients and will they will refer them to family and friends in the future.
Your relationship with your Lending Partner must be reciprocal. The perfect partner is going to be in for the long hall, and you must be sure that your ‘easy' purchase referrals go to this person as well as the credit challenged customer. Take the time to share your vision and business plan with your prospective lending partners, and take the time learn about their business as well.
Your Lending Partner is a key member of your team, and critical to your profitability.
Does Your Lender Have a Credit Rehabilitation Plan?
Most reputable lenders have a credit rehabilitation program they contract with. These services work closely with your buyer for the period of time necessary to ‘coach' them to an improved credit score. Most cities have non-profit entities that provide home buyer education classes as well. Completion of these classes can help the buyer qualify for grant money if they and the home they are purchasing qualify. Sometime successful completion of the classes alone aid qualifying for a traditional mortgage.
The First Meeting
We always recommend the investor or the investor's Realtor meet with the buyer and the lender together at the lender's office. The initial portion of this meeting may include the exchange of confidential information the buyer may not want to share with you or your Realtor, so be sensitive to that. At a minimum however, you should conclude the meeting together so the buyer sees that you and your lending partner are both committed to getting the buyer into the home they want with financial terms that work for them.
FHA and Conventional Seasoning Rules
Lenders have specific criteria for determining whether to make a loan and one of them is under what circumstances the property is being sold. While you should never allow a buyer's lender to bully you into accepting less for a property than it is worth, it is helpful to be aware of the constraints they operate under.
Yes you must stand your ground but there is no reason to rail against something that is completely and utterly beyond your control either. FHA will not finance a home unless it has been held by the seller for a minimum of 90 days. In addition, expect to have to detail what you did to the house and provide your own comparable sales for review. Conventional mortgages backed by Fannie Mae and Freddie Mac have their own internal guidelines to limit risk, fraud, and predatory lending.
Appraisals by definition are an opinion of value. They are however the opinion of a professional licensed by the state and contracted by a lending institution that wants to ensure that every loan they make will perform. Appraisals sometimes come in for less than the price the property is contracted for. Sometimes the appraisal comes in just fine but the lender requires a second appraisal to justify the first. This is dictated by their internal underwriting requirements.
During 2008 and into 2009 we saw more and more second appraisals requested. One of the reasons is that we work in a market area being designated as ‘declining'. This means that home prices have been going down year over year. Banks are not in the business of making loans against depreciating assets.
Laws governing lending are changing on a monthly basis making it all the more important to develop a relationship with a reputable lender that understands your business.
For more information - visit us at www.TheMcAllisterTeam.com