Lending Niches that can Make or Break your Deal - Did you know?

By
Mortgage and Lending with Silicon Valley Capital Funding

Niches. Such an interesting word. Webster defines it as "a distinct segment of a market".

What do you define it as? A specific focus or offer that is unusual or more difficult to find? Or some other variation of this theme?

Often times in Real Estate, our very career is set in motion by a niche - First Time Homebuyer, Luxury Homes, Vacation Homes, New Homes,on and on, etc., etc., etc.

Naturally, this begs the question - are there other ways to build my niche? Can I augment what I already do, or even better, can I create an entirely new offer based on an opening?

In the Real Estate industry, there are many vendors and side businesses that grew out of this very premise, Title Companies, Home Warranty Companies, Appraisers, Staging.

Each of these side businesses have grown and impacted offers that can now be made that were not always in the marketplace.

I will share where lending options can dramatically increase your power and marketability, opening up more clients to being able to buy or sell.

Time for some Lending Background -

Since 2007, lending has gotten almost comically conservative. There is a very long list of clients and realtors who know the frustration of a loan not closing on time, or worse, not closing at all.

Banks, buckling under significant political pressure, put the brakes on lending programs overnight, and in so doing, impacted equity in an unprecedented fashion. Most major Real Estate Markets saw remarkable drops in value, and it was a remarkable and far reaching impact.

Interviewing Realtors and potential Homebuyers during this time, the common theme and primary complaint was a lack of financing or flexibility. Indeed, the amount of lending was reduced by nearly 50% - essentially cutting the homebuying public in half.

The Real Estate market became even more of a Supply and Demand game - simply stated, fewer lending options meant fewer buyers, and fewer buyers meant less competition for homes. Low demand meant lower prices.

Which brings us to the obvious question, When will lending return? We are now seeing some significant shifting in the lending field, and I will outline next what that looks like.

Where the rubber meets the road....

Ever had a buyer who had little money for a down payment? But they did not want the high cost of mortgage insurance that we see on FHA loans?

We now have 5% down payment programs that have no mortgage insurance. How is this possible? Lenders simply charge a higher interest rate, and it is not a big difference. For a client who has good income but is limited on funds, this can be a superb fit.

What about a client that filed Bankruptcy or has gone through a Foreclosure or Short Sale?

The main banks will now allow a client who is out of bankruptcy 4 years to get a standard conforming loan. We have additional lending options that allow shorter times out of bankruptcy.

For a foreclosure, we now have lenders who will allow a client who is 3 years out of foreclosure. For Short Sales, we can do clients who are 2 years out of the short sale.

The same logic applies, as these events mean that the client will pay a higher interest rate - however, not a significantly higher one.

What about Foreign Nationals? There are several distinctions with these - Do they have a Green Card? Do they have a Work Visa? What about an employment contract? What if they have no credit or no credit score? We now have lending options with 30% down, with no credit and with no green card. Lenders will ask for proof of an employment contract and any work being done with assisting in obtaining a green card.

For clients who are short on income and are asking if mom or dad can sign with them, this is an option. Mom and Dad can essentially act as co-signors, where the income of the parent(s) can help qualify.

Have a client who is living off of their savings? Taking cash out of the bank each month? We now have lending options where this would be counted as income, under the requirement that there is a 2 year history that can be documented.

What about a non-permitted addition to a home? This was a fairly common occurance before the lending changes of 2007, but it is now back. We have lenders willing to lend on these.

Have a client that did a quick close with all cash, and now needs some or all of it back? We can help with this client. Called delayed financing in the industry, with inventory being so low sometimes clients pay cash and close quickly to make the transaction work.

Summary....

There are many options returning to the lending side of the Real Estate industry. Some are credit easing regarding negative events, and some are related to income or resident status.

Would any of these allow you market differently? Would it make sense to incorporate these and go back to past transactions or clients to see if it would help them now?

I have several marketing pieces specifically designed for realtors to take advantage of.

What can we do for you? What can we do for your active clients?

 

Share your thoughts and comments here on the Rain - have you saved a deal with something like this? Follow me here on the Rain or at Linkedin. I thank you for reading and participating!

 

 

 

Comments (1)

Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Eric, it's great to know you have some niche products for potential buyers with special situations. Not all buyers have the same limitations and strengths, as we well know.

Feb 17, 2014 09:31 AM