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Deal of the Month, We Cannot Lie

lomHard Money Loan of the Month
By Ken Walker, Lead Loan Originator

Investment Property Purchase in Sea Ranch, California

Two weeks ago a borrower called needing a loan to buy a new Rental Property in Sea Ranch, California as part of a 1031 exchange.  Her current Lender was unable to perform with the speed that was needed to satisfy the 1031 exchange and the Seller’s needs.

The purchase price was $1,100,000 and she needed a loan amount of $745,000, making a loan-to-value of 67.7%.

This borrower called at 4:30pm on Thursday.  We got right to it and that same night got the loan approved with an interest rate of 8% for 5 years! The property was cross collateralized to another property she owns, giving a lower the loan to value, thus the better rate.

On Friday the loan was funded and Monday morning the loan recorded with the borrower’s keys in hand!

One of our favorite mottos is, “If we say it can be done, we’ll get it done!”  And another is, “We fund big loans, we cannot lie!”

Call our office at 707-523-2099 if you need some creative financing help for your real estate purchase or refinance.

Top 5 Reasons To Refinance Using Hard Money

top5If you have good equity in your home, you can potentially refinance.  Below are the top 5 reasons one would refinance using hard money, also known as alternative financing:

  1. Remodel your property
  2. Buy an investment property
  3. Consolidate debt
  4. Get ready for the Holidays
  5. Finance kids education

 
Refinancing one’s home doesn’t only reduce stress it has the added value of increasing your income tax deductions.  The money you were paying out for those non-deductible expenses is now being applied to a tax deductible expense!

We are a local, family owned & operated company who is ready to assist you with your refinance. Call us with your scenarios at 707-523-2099!

 

Fractionalized Loan Investing

fractionalized

Funding Large Loans…

I wanted to report nothing but good news here at Sun Pacific Mortgage. Last month was another record production month. We are funding an ever increasing number of loans and larger and larger loans.

To get some of the larger loans done we have had to “fractionalize” the loan. This is the formal term we use that describes having more than one investor contribute funds to get the loan done. As an example: $750,000 loan amount and 2 investors each invest $350,000. Another example: Same loan amount of $750,000, but Investor 1 funds $300,000, Investor 2 funds $200,000, Investor 3 funds $200,000 and the final Investor funds $50,000. This is a very common investment tool.

Here are some of the pros and cons of “fractionalization” from the Investors viewpoint.

Pros first: These are just a few of the reasons to do a “fractionalized” loan. 

  1. This allows you to have a share in a very good loan spreading the risk to a number of investors.
  2. It allows you to get your money out there rather than waiting for a loan that fits your available funds.
  3. You don’t have to have all your eggs in one basket. Rather than doing just 1 loan you spread your investment dollars around on a number of smaller investments.

Cons:

  1. All investors need to agree on a course of action if the loan gets into trouble. This is only real con I could come up with. I must point out that this has not been an issue in the past 5 or 6 years as we have not had a residential foreclosure in that time, that I am aware of. The decision that matters is to foreclose or not foreclose. It’s usually pretty obvious.

Fractionalization can be an amount from $100,000 to $1,000,000. Hopefully this description of “fractionalization” can expand the opportunities for you as the Investor.

Are You A Risky Borrower?

I have heard numerous stories from my past borrowers where they were told how acquiring a home loan would be an unending, agonizing and complicated process. And that on top of this, one minuscule credit problem was going to end their journey to getting their dream home.

This is not the case if you findriskthe right Lender. Getting a loan for the home you desire can prove to be difficult if Lenders see you as a “high-risk” borrower.  So what is a high-risk borrower?

There are 4 circumstances covered in a recent Trulia blog “Are You A Risky Borrower? 4 Ways To Find Out” that are helpful in answering this question:

  1. Your credit score is below 620.
  2. Your employment history is unusual.
  3. You have financial responsibilities you aren’t taking care of.
  4. You don’t have a down payment.

If one or more of these applies to you, then you probably have some work to do before you can be approved for a traditional home mortgage. Not so with Hard Money.  The only item we cannot contend with is no down payment.  

If your favorite Lender or bank turns you down for a home loan, give us a call at (707) 523-2099.  We have helped many a high-risk borrower with our creative financing programs, known as hard money.  We would be happy to help!

For a more in-depth look at the above 4 points, see the original article here: http://www.trulia.com/blog/are-you-a-risky-borrower-4-ways-to-find-out/ .

 

My Own Hard Money Story

1I wanted to tell my personal story about Hard Money financing to help other families struggling with loan approvals.

My Husband and I could not get any local bank or credit union to approve our loan application to buy our first home.  I had not yet worked at my job for 2 years and my husband was self employed with difficult to prove income.  But, we had come upon the perfect home and had a good down payment so did not want to miss out!

Fortunately for us, my Husband’s Parents,  Lynn and Forest, own Sun Pacific Mortgage, a Hard Money lender.  Sun Pacific offered financing for  principal residence (owner occupied) purchases.  We did a loan application and he Pre-Approved us on the spot!  YAY!

Within 2 days Forest had our home loan approved by one of his many private investors.  He also said he would get us connected with a good, local conventional lender to help us refinance as soon as we could, for that lower home mortgage rate. How nice!  

After all was said and done, the Sellers accepted our offer over others with conventional financing because we could close fast and basically had a cash offer. We bought our first home with a 10.5% interest only loan.  Before your mouth drops open as much as mine did at first, listen to what this really meant:

This “high cost mortgage” really was only $200 more a month than I was already paying for my small apartment.  That apartment had no yard, I couldn’t do what I wanted to it and I had to put up with living above noisy neighbors.

2Just $200 more a month gave me a bigger home, I could paint and decorate however I wanted, I could privately enjoy backyard fun with my kids and I started benefitting from the tax right-offs of homeownership!  

It really is a just a math problem:  Can you afford the new monthly payment?  I already knew it was worth it, even if it did cost a bit more per month.   If it’s worth it and benefits your family then DO IT.  Especially since you could qualify later on and get a lower interest rate upon refinancing…but if you don’t act fast, you could miss out on the deal you wanted.

This is my Hard Money loan story and why I have the passion I do when working at this Company now, helping others with similar circumstances. It’s always a happy ending!

Reasons To Sell A House This Summer

Selling one’s house can be a challenge no matter what season it is, be it Summer, Winter, Fall or Spring.  According to Keeping Current Matters article, “5 Reasons To Sell This Summer”, there is some logic in selling your home during the hot summer:

1

  1. Demand Is Strong
  2. There Is Less Competition Now
  3. The Process Will Be Quicker
  4. There Will Never Be a Better Time to Move Up
  5. It’s Time to Move On with Your Life

With strong demands, less competition and quick processing, how could anyone pass up an opportunity to make a sale and profit? Sounds like if you’ve ever considered moving up or moving out, now is the time to take advantage of the Summer real estate selling benefits.

After years of experience in the real estate and lending markets here in Sonoma County, California, I can definitely say that jumping at the right moment to buy and sell is important.  It could make all the difference in success or not.

What are Hard Money Loans and How Do They Work?

real-estate-investment-loans

If you’re not familiar with Hard Money Loans, you may be asking yourself what they are, and what makes them different from traditional loans? If you have had trouble getting a loan through your bank or other traditional lending options due to bad credit, a past bankruptcy, or other troubles, it may be time to start looking for alternative finance solutions.

This is where Hard Money comes in.

At Sun Pacific Mortgage & Real Estate, we are experts at providing Hard Money Loan solutions. It’s what we do best! We have been providing them since 1988 in Sonoma County and can lend throughout all of California, dedicated to delivering a straightforward and complete loan process to get you financed quickly.

Let’s take a look at some of the details:

Private Mortgage Brokers/Private Lenders

Banks are usually not interested in providing a mortgage to a bad credit household due to what they perceive as potential risk. Hard Money Lenders are more interested in who you are and how you make your living, and less concerned with bad credit. They are not tied to the traditional bank process and can look at your situation on a personal level.
Simply stated, Private Lenders are people looking to make a deal, just like you! They want to lend you funds for that property you want, in exchange for repayment of the loan with interest.

Still sounds a lot like a bank loan doesn’t it?

Well it is, but Lenders will look at the whole picture, not just what’s on paper!

What is Loan-to-Value (LTV)?

When it comes down to lending on a property purchase, the amount you can receive is based purely on the value of the property. This is what we call the Loan-to-value (LTV) ratio. LTVs are an important aspect of Hard Money lending. Most of the time, Private Lenders will offer 65-75% of the value of a property, requiring you to come up with the remaining 25-35% before applying.

Sounds a lot like a down payment with traditional lending doesn’t it? Right again! This helps secure the loan and provides a good faith investment along with your promise of repayment.

Loan Options and Property Types

Hard Money Loans are beneficial to property investors looking to make profits on purchases, rentals, home flips, business purposes, and sometimes construction. It is also beneficial to individuals looking to purchase their first home, a move-up home, refinance for debt consolidation or to pull extra cash out for home improvements.

Private Lenders like to see your plan to make a profit with the loan, either in rising property values, rehabilitation or acquiring extra income from renters. If you are looking to purchase a home to live in, Lenders will want to know your “exit strategy”, or how you plan to refinance or repay the loan in the future.

A good plan can be just as good as a great credit score in the eyes of Private Lenders!

Requirements for Borrowers

So let’s say you have a property picked out, 25% of the purchase price to invest and a good plan and repayment strategy… now what?

The rest is going to come down to your income, current finances, and providing proof that you can repay the loan. Typical loan amounts start at $100,000 on property purchases, and go up through jumbo size loans ($400K – $1 million and up from there). You can qualify for this loan even with a poor or bad FICO, a recent bankruptcy, foreclosure or short sale, the above are the requirements looked at by a Private Lender.

The length of a hard money loan can be short term, 12-24 months or 3-5 year and longer such as 15 or 30 year terms. Are things starting to make sense? We hope so!

Call Sun Pacific Mortgage & Real Estate today (707) 523-2099. We’ll get you started with a free consultation so we can get to know you and you can get to know how we can help you!

Owner Occupied Principal Residence – Part 2 of 2

pic1 This is Part 2 of Owner Occupied Loans. In this writing I will feature several of the legal aspects of this all-important Program.
If you missed reading Part 1, click here!

The purpose of this article is to encourage investors to continue to make these loans, in spite of the rumors that exist surrounding them.

I will start off this article the same as the beginning of Part 1, by saying that I will always offer loans to homeowners that are owner occupants. It is an important segment of lending and a heck of a niche for my office. I will say that the feds have brought about a lot of regulatory protections for this class of Borrower, but that is simply because they have determined home ownership to be such an important right and should be protected. It’s kind of like car seats for kids, seat belts, speed limits, food labels, movie ratings, warning labels on medications, etc., etc.

I will also tell you that there has not been a foreclosure of an owner occupied loan originated by my office (that I am aware of) in the last 6 years. This is key.

There are really just 2 quasi-objectionable regulations that apply to owner occupied transactions.

  1. The loans can be rescinded for up to several years if the correct disclosures were not made at the beginning of the loan. Rescinding a loan means that the Borrower gives back the principal and the investor (and the Broker) give back the interest and the fees. I asked our attorney about the incidence of this and he had no answer. I have never heard of it happening. I have also done tons of research on line on the subject and cannot find case law that applies. That is proof that, while there is lots of regulation, the occurrence of legal problems with these loans must be minimal as I cannot find anything on the subject.
  2. These loans take longer to foreclose upon. As these loans are required to be serviced, this is a servicing question. The regulation requires you wait 120 days to begin the foreclosure process. Then it’s just the regular foreclosure timing. From my experience, most investors would wait this long at least. Add to that the fact that we have not had a residential foreclosure (that I am aware of) in the last 6 years and it really is much ado about nothing.

pic 2
So, statistically, owner occupied loans don’t get foreclosed upon in any significant number (zero in my office), Borrowers do not rescind the loans in any significant numbers (I cannot find any mention of it on line), the loan to values are good, they have an ability to repay the loan, they have an exit strategy, they pay the property taxes and insurance monthly, they do a consumer credit counseling class and the properties will likely appreciate in the coming months and years.

So if you hear mention of avoiding these loans, show whomever has said it these articles. These loans are important and a very good investment.

Get a Home Loan even with Bad Credit

badcredit
Every day people are turned down by their favorite banks, and lenders due to bad credit or other circumstances. These are often hard working individuals with good income, enough savings for a down payment, and a desire to own a home. Unfortunatley for these people, banks usually don’t look any closer than your credit score before they turn you down.

There are other options out there.

Improve your Credit

This one is obvious! The first thing the big banks will usually tell you is to fix your credit and come back to them once you have. There are plenty of companies and services out there who will help you plan financially to target your credit problem areas and fix where things went wrong. Unfortunatley this can take a year, two years, maybe more.

Careful planning and the right spending habits can get you back on top of your credit game, but it may be too late if you had a specific property in mind.

So what are your alternatives? Let’s take a look.

FHA Loans

The Federal Housing Administration (FHA) is specifically designed to help low-income individuals and households get a home loan. These loans are great, for those who qualify, but if your income is too great, you may not even have a chance to apply. Your best bet is to find and contact an FHA lender and start the process.

So what if you don’t fit the FHA requirements for low-income household?

Your next and only option is simple.

Hard Money or Private Money Loans

pic 5Hard Money and Private Money are interchangeable and have also come to be known as alternative financing or creative financing. Such loans are funded by individuals looking to fill a gap in the market place. They are private investors who want to help borrowers get that home or investment property they want, without having to wait for their credit to improve. Typically they need only see steady income and a good down payment to approve.

The rates for Hard Money and Private Money loans are generally higher than conventional mortgages and even subprime mortgages, in order to compensate for carrying greater risk. Hard Money and Private Money real estate finance program qualifications also will not turn you away for a bankruptcy, difficult-to-prove income or bad credit.

Short Term Financing

Hard Money and Private Money loans are often set-up with an “exit strategy,” so the Borrower can plan to refinance down the road and receive a better rate after solving any credit issues. These types of loans are often designed for shorter term financing, such as for real estate investors looking to buy property to remodel and rent for extra income or for individual homeowners looking to consolidate debts and bills by refinancing.

At Sun Pacific Mortgage we aim to help any Home Buyer or Home Owner who is looking for more options than the subprime lenders, traditional banks and FHA lenders have to offer. We work directly with the Borrower and Investor to find a loan strategy that works for you!

If you are interested in refinancing or buying property in any of the beautiful counties of California: Sonoma County, Napa, Marin, San Francisco, etc. then give us a call at (707) 523-2099 for a free consultation and let us help you get that home or investment property you’ve been hoping for.

Ways To Improve Your Home For Under $1,000

b1There are many benefits to owning a home. Increasing equity and the ability to make improvements or changes to the house are homeowner benefits I will discuss here.

Having worked in the real estate and mortgage industry for almost 30 years now, at our family owned and operated Sun Pacific Mortgage & Real Estate company, I’ve experienced first-hand and seen how expensive such an activity can get.

Trulia put out an article which I found beneficial to any homeowner, even those not as skilled or financially well-off as others: 7 Ways To Get Your Home Open-House Ready For Less Than $1,000. The article covers each point below, in detail. Hope these tips keep you from breaking the bank, when trying to improve your home’s value and appearance:

  1. b2Paint (parts of) the exterior
  2. Kick up your kitchen
  3. Replace the vanity in your bathroom
  4. Slipcover furniture that has seen better days
  5. Make your bedroom feel like a hotel suite
  6. Freshen up your walls and floors
  7. Perk up your patio

 

You will be surprised how the above can spruce up your home for you to enjoy, as well as your family & friends and even an Appraiser!

If you are interested in becoming a homeowner so that you too can enjoy the numerous benefits of owning a home, but have been turned down elsewhere for a loan, give us a call today at 707-523-2099 and let us help you with our hard money loans.

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