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“HARD MONEY” OR “PRIVATE MONEY” LOAN REVISITED

May 2, 2011 No Comments

LENDER’S VIEWPOINT

By Owner

There are several types of loans you can use to purchase or refinance. This applies whether you are buying a home to live in, a home to rent out, or a commercial building. They include the standard 30 year fixed rate mortgage, the government FHA/VA loans, a commercial property SBA loan, or a Private Money loan.

Private Money is borrowed from private individuals. I bet you’ve borrowed money from a relative. That was a Private Money loan, likely unsecured. It wasn’t from the bank or some other institution. Most private money lenders/investors lend money through a mortgage company (there are laws that require this). The rates and fees are higher than those you’d get from a bank or credit union that does 30 fixed rate mortgages.

Why then would anyone borrow Private Money? There are lots of reasons.

You can get a Private Money loan in spite of a foreclosure, bankruptcy or short sale!

I thought to make the above sentence read like a headline, because it should. No bank or credit union or anyone doing home loans other than Private Money will lend to someone who had a recent bankruptcy, foreclosure or short sale. Further, the property you want to borrow against may not be something a bank will lend on. Banks require a property be in good shape. What if you are looking for speed? Private Money loans are generally much faster than a bank loan. What if your credit isn’t bank worthy?

That’s because Private Money loans are based largely on equity. The most you will get is 70% of the value of the property. If it’s worth $300,000.00 you will be able to get $210,000.00. If you want a 100% loan, Private Money will not work.

Here is an example of a Private Money Loan. The Buyer had almost all of the money to purchase a house. She needed only $75,000.00 more – but didn’t qualify for a bank loan. The purchase price was $231,000.00. She only wanted to borrower 32% of the value. That loan got done within 4 days for a quick close. She beat out other’s that put in offers for the house. She could and did quickly close and her house payment is the payment on $75,000.00.

Another example. A contractor wanted to buy a dumpy house. No bank would lend on it because it was so dilapidated. The contractor had enough for a decent down payment and proved he had enough to money fix it up and then resell. He got a Private Money loan and was able to fix up the house and pay off the loan within 4 months.

Maybe you need a Private Money Loan!

Owner is a CA DRE Broker with over 20 years experience in real estate and lending. His number is (707) 523-2099. See website @ sunpacmortgage.com.

Special Edition: Sun Pacific Investor Quarterly

March 22, 2011 No Comments

 

 

Special Edition

 

Sun Pacific Investor

Quarterly

A Newsletter for Investors in Trust Deeds

Volume 7 Issue 2      Integrity  • Knowledge   •   Honesty      March 2011


 

Change – Change – Change

 

            So much change has been wrought in the lending industry since what has been deemed the “mortgage debacle”.  With the dust somewhat settling on the new lending landscape  I thought it time to inform Investors of just a few of the regulatory changes impacting Hard Money.  These changes impact the Borrower, the Mortgage Broker and the Investor. 

Nationwide Mortgage Licensing System (NMLS)

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the S.A.F.E. Act) requires the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the Farm Credit Administration (collectively, the Agencies) to jointly develop and maintain a Federal registration system for those who engage in the business of residential mortgage loan origination. The statute requires these individual mortgage loan originators to be registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established previously by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States.

A direct result of the mortgage meltdown, NMLS was formed a few years ago to more fully qualify and register loan officers.  It operates independently from, for instance, the Department of Real Estate in California.  The term for a lender who has passed all the qualifications of the NMLS is a Mortgage Loan Originator (MLO). 

 

Some of the qualifications include…

·         Separate state and federal testing

·         Hours of qualifying Education

·         Criminal Background Check

Mortgage Brokers who have passed the above requirements receive a Unique Identifying Number.  Their company too must register with the NMLS and be given a Unique Identifier Number.  

Mortgage Loan Disclosure Statement (MLDS)

 HUD has issued revisions to the Real Estate Settlement Procedures Act (RESPA) (Regulation X) which became effective with loan applications taken on or after January 1, 2010. These important regulatory changes impact the Good Faith Estimate (GFE) and Housing and Urban Development (HUD) Settlement Statements (HUD-1 and HUD-1A) and will place new requirements on loan originators to ensure that borrowers are better positioned to understand their mortgage transaction.

Note that the MLDS and GFE apply to non-owner occupied loans now.  More on this in a future Issue. 

 

            Investors would do well to ask any Mortgage Broker they do a loan with for his or her Unique Identifier Numbers.  Also inquire if they provide the MLDS within 72 hours after taking any loan application.  It’s the law.

          Feel free to call or email me anytime with  further questions you may have regarding investing in Deeds of Trust.

                                    Best,

Owner

Owner/Broker

Unique Identifier # 289456

 
Sun Pacific Mortgage & Real Estate (707) 523-2099

800 Mendocino Avenue #2, Santa Rosa, CA 95401

www.sunpacmortgage.com

or email Broker at forest@sunpacmortgage.com

 

HARD MONEY INVESTOR SEMINAR

Attend this informal discussion of current regulations impacting Hard Money Investments.  Tuesday – March 22 @ 5:30 pm at the offices of Sun Pacific Mortgage – 800 Mendocino Avenue #2, Santa Rosa.  RSVP please to Loan Originator, Broker or Lynn.

4 Ways to Buy a Home

December 29, 2010 No Comments

 Newly Built Home – There are still newly built homes on the market.  In the Sunday section of the paper these are highlighted with a map.  Sometimes there is special financing available through the builder.

  1. Resale Home – These are homes for resale by the owner.  Sometimes the owner still lives in them and sometimes they are empty.  Financing is available through the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac.  All three agencies require proof of income, a down payment and will examine your credit.  30 year fixed mortgages are available.
  2. Short Sale – These are homes for sale that require homeowner/seller approval and lender approval.  The seller owes more than the property is now worth.  As an example, the mortgage owed is for $400,000, but the house is only worth $250,000 right now.  The seller and their mortgage holder have to approve the contract for sale.  The loan you get will be a typical FHA, Fannie Mae or Freddie Mac 30 year fixed.  But you might have to wait – even up to 6 months – for the mortgage holder to approve a lesser pay-off.
  3. Foreclosure – For some reason a lot of people think buying a foreclosure requires a strange and different loan.  It does not.  BUT FHA, Fannie Mae and Freddie Mac do require an appraisal.  The appraisal cannot say the house is an extreme “fixer” and needs lots of lots of work, or you won’t get a typical 30 year fixed rate loan. If the foreclosure you are looking to buy is tired and dirty – which a lot of them are – you generally can get a typical loan.  If the property is an extreme “fixer” and it is obvious, the appraiser will note this and the lender will not approve your loan.  Other than that, buying a foreclosure is like buying a regular resale.

Owner is a CA DRE Broker with over 20 years experience in real estate and lending.  His number is (707) 523-2099.  See website at: sunpacmortgage.com.

The Wave Is Coming

December 27, 2010 No Comments

We keep hearing reports that the foreclosure wave is coming. It’s on the news and in the paper. Maybe it is, maybe it isn’t. We have not seen much evidence of it in Sonoma County. Here’s what we know so far… Fannie Mae has been holding back flooding the market with foreclosures so prices stabilize. That is working well. The Medium Price has gone up from $305,000.00 to $320,000.00 since January 2009. Foreclosures for sale have gone down from 350+/- in December 2008 to 116 as of today.

IF the wave is coming you need to prepare now. All offers made on foreclosures require loan approval be attached to the offer. Sometimes 2 loan approvals are required. If you do not have loan approval they will not look at the offer. Get loan approval now!

There are 3 types of loan you can get right now. Fannie Mae and Freddie Mac (usually 30 year fixed, low interest rate loans) for as little as 5% down. FHA an easier standard for loan approval and only 3-1/2% down. And lastly, private money from private individuals. These private money loans are needed if the house (a wreak/dump) does not qualify for the government loans. Private money requires 20% to 25% down, but the private party lending the money does not care what shape the property is in.

The Federal Government is keeping rates low. Normally rates are dictated by the yield on Treasury Bonds. Yields are up and rates should be up, but they are not. The guys on Wall Street are befuddled because the normal measure of interest rates isn’t happening. The “wave is coming” is the “perfect storm” for buying. House prices are low and interest rates are low.

This perfect storm lasts for a brief time, so get approved now and be prepared. Owner is a CA DRE Broker with over 20 years experience in real estate and lending. His number is (707) 523-2099. See website @ sunpacmortgage.com.

WHAT IS A “HARD” MONEY OR “PRIVATE” MONEY LOAN

December 15, 2010 No Comments

There are several types of loans you can use to purchase or refinance. This applies whether you are buying a home to live in; a home to rent out; or a commercial building. They include the standard 30 year fixed rate mortgage; the government FHA/VA loans; a commercial property SBA loan; or a private money loan.

Private money is money borrowed from private individuals. I bet you’ve borrowed money from a relative. That was a private money loan. It wasn’t from the bank or some other institution. Most private money lenders/investors lend money through a mortgage company (there are laws that require this).

Why would anyone borrow private money? There are some great advantages. The property you want to borrow against may not be something a bank will lend on. Banks require a property be in good shape. What if you are looking for speed? Hard money loans are generally much faster than a bank loan. What if your credit isn’t bank worthy? A private money lender will lend you money even with bad credit!

Private money loans are based largely on equity. The most you will get is 70% of the value of the property. If it’s worth $300,000.00 you will be able to get $210,000.00 If you want a 100% loan, hard money will not work.

An example of a hard money loan just happened. The borrower had almost all of the money to purchase a house. She needed only $75,000.00 more – but didn’t qualify for a bank loan. The purchase price was $231,000.00. She only wanted to borrower 32% of the value. That loan got done within 4 days for a quick close. She beat out other’s that put in offers for the house. She could and did quickly close and her house payment is the payment on $75,000.00.

Another example, a contractor wanted to buy a dump house. No bank would lend on it because it was so dilapidated. The contractor had enough for a decent down payment and proved he had enough to fix it up for resell. He got a hard money loan was able to fix up the house and pay off the loan within 4 months.

Maybe you need a hard money loan!

[youtube=http://www.youtube.com/watch?v=V2ebzlL4360]

Owner is a CA DRE Broker with over 22 years experience in real estate and lending. His number is (707) 523-2099. See website @ sunpacmortgage.com.

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