Get to Know Different Types of Private Mortgage Lenders

Applying for FHA, conventional and VA loans is quite easier today. New regulations have been mandated that relaxed loan requirements for homebuyers. However, not everyone is lucky enough to be approved of these loan types. Luckily, private mortgage lenders offer loan services that give others a chance to own a property.

What many people don’t know is there are three main types of private mortgage lenders. Knowing these options let buyers know the best groups to choose for their loan needs.

Individuals

As the term implies, individual private lenders are single individuals who are using their own money to fund loans. People who are individual private lenders engage in the business for a good return. Some people consider relatives and friends who are providing loans and funding as their own private mortgage lender. Buyers may find these private mortgage lenders’ rates way cheaper. The catch, however, is the possibility that these individual lenders are not as reliable as typical lending companies.

Syndicate

A syndicate is considered as a company or organization formed by several individual investors or lenders. Rather than funding one client per individual, they go together and form a funded pool that can be used in funding borrowers’ homes. This funded pool is created on a case-to-case basis.

One of the possible benefits in using syndicate private mortgage lenders is the possibility of less strict requirements on getting a loan. They may ask for fewer documents, but buyers need to still double-check their requirements as syndicate private lenders may have varying policies before granting loans. This is a good option for those who can’t get VA and FHA mortgage, which often requires a lot of documents.

Mortgage Investment Corporations

Mortgage investment corporations are larger syndicate groups. They also create a funded pool that can be provided to clients. Since corporations have more people, they are able to generate more funds that allow them to fund multiple mortgage deals at one time. These lenders can fund numerous borrowers, so they can own a house.

What people need to know is their capacity to provide multiple loan deals require mortgage investment corporations to comply with lending guidelines. Lending guidelines for them are set by local authorities dedicated to mortgage and funding.

Mortgage investment groups may also have stricter mortgage requirements. Buyers must comply with their own lending guidelines and provide all documents they set. They will then assess their clients’ financial capacity to pay their mortgage before approving the loan.

Using mortgage investment corporations may also have many reviews, allowing borrowers to read reviews about their services.

Private mortgage lenders are the last resort for people who can get common home loans. Just like in working with conventional loan providers, buyers must check private lenders’ mortgage loan rates and their deals before signing up for a mortgage.

Mortgage Pre-Approval: A Must or a Waste of Time?

Mortgage pre approval is the process of getting finances assessed in preparation for mortgage approval. It’s considered as the first step in getting a mortgage suitable for buyers. However, many people don’t think its important part of mortgage application process.

Reason Behind the Thinking

The number of people who failed to file for pre-approval is the main reason behind this thinking. A report claimed that many people skip this part of mortgage processing, but still get their loan approved. It means it doesn’t have as much bearing on mortgage application process. However, pre-approval still has its merits for a number of reasons.

Differentiating Pre-approval from Pre-qualification

The process between pre-approval and pre-qualification is similar. However, pre-qualification is less stricter than pre-approval. In pre-qualification, lenders will only consider basic financial information that makes you qualified to get a loan. Based on your accounts, a lender may conclude that youmay qualify to get a loan.

Pre-approval, on the other hand, is stricter because lenders will further investigate your financial records and verify your financial approval. For them, pre-approval means you may be pre-approved of the loan you’re planning to apply for. Lenders would use the same documents used for actual mortgage application then assess them using the same procedure.

What can It Do for Buyers?

Pre-approval has its advantages for clients. This allows clients to get property offers coming from different brokers and sellers. Sellers know that a pre-approved person is capable of getting a house. They simply need formalization for mortgage and they can complete the process with ease.

Another advantage is it increases the chances of getting approved for loans. Initial analysis already showed that a pre-approved individual is capable of paying their loans, which means good business for lenders.

Required Documents and Procedures

Mortgage lenders will look for several documents for pre-approval. The first types of documents are personal information where prospect borrowers must show government issued identifications like social security number, driver’s license, marital status, and verified contact information.

The next set of documents to present are financial accounts. Bank statements and other investment accounts must be presented to gauge a person’s financial profile. Aside from bank statements, other related documents that show general financial standing like assets, IRAs, and retirement incentives must be submitted to further study a person’s financial status.

Proof of capability to pay loans is the next types of documents. Proof includes employment information. A person with stable work and has been working with their employers for a long time will show lenders if he can be pre-approved for a mortgage or not.

What People Must Remember in Getting Pre-approved

While pre-approval increases the chances of loan approval, it’s not a guarantee that a person will be approved of a loan. Lenders may find a person capable of paying for loans, but not for a specific amount needed for their property purchase.

Pre-approval has its merits and is important for people looking for the best mortgage rates. Filing for mortgage pre approval is now easy through different lenders serving a person’s locale. Information about this process is also available on their websites.

Recasting a Mortgage

“Recasting a Mortgage” is a little known secret that can really help homeowners who want to make a large principal reduction and lower their payments without refinancing.

Here’s how it works:  For a fee of around $100 to $300, and a principal reduction of at least $10,000, your mortgage servicer will re-cast the monthly P&I payment based on the new principal balance and remaining loan term. The end result is the borrower pays off their mortgage in the same period of time they expected originally but now have lower monthly payments.

Recasting is a great option for buyers who have a home and want to sell it after purchasing a new home. Once they’re in the new home, they can sell their previous home and use those proceeds to recast their loan balance and monthly P&I payments. Best of all, you do not need to incur the cost of refinancing.

Lenders Are Now Backing Off On Requiring Medical Collections

Medical collections are without question the most erroneous reported accounts on credit reports. We all personally know how difficult it can be to figure out medical bills and the explanation of benefits we get mailed to us after we have received care. Errors are rampant typically because it is so difficult to decipher the multiple bills that are associated with a single doctor visit. Figuring out what we owe is like learning a foreign language.

The good news is that lenders are now backing off on requiring medical collections to be paid. We recently had an approval for a borrower who had over $20,000 in medical collections.

Important note: medical collections still hurt your credit score and if there are many of them, they could affect your ability to be approved. It is always a good idea to make sure you check your credit report periodically to make sure you do not have any erroneous medical collections on there.

Arizona Purchase Contract For Limited Personal Property

Underwriting guidelines in the past would allow personal property (typically furniture) to be included in the contract as long as it was indicated on the contract or addendum that the personal property conveyed without any value.

That is no longer the case. Be careful if you are thinking of adding personal property to the contract. You may end getting a call from your lender asking you to either remove the personal property from the contract OR you’ll need to get a 3rd party to document the value of the personal property and then that $ amount would have to be accounted for in the appraisal. Bottom line is, guidelines will no longer allow us to say that the personal property will convey with ‘no value’.

To clarify, the Arizona purchase contract allows for limited personal property items to convey as seen on page 2, line 41-45 of the purchase contract. Those listed are acceptable to convey without any issues.

On a side note, looks like 2015 could be shaping up to be the best year for home sales since 2007.

Millennials In A Minute

Millennials…the oldest in the age group, generally considered those born between the early 1980s and the late 1990s, launched careers during the recession. Jobs were scarce, earnings were stagnant, and as a generation, they accumulated record amounts of student debt. Many simply couldn’t afford to leave home.

See this excellent graphic to learn a little more about the Millennial market.

Millennials in a minute

Here’s the good news: Recent economic reports show a steady shift toward more jobs and increased wage growth. Millennials may leave home soon after all.

3 Important Warnings To Your Buyers

As a Realtor, you are likely in contact with window shopping buyers months in advance before they actually speak to a loan officer and get pre-approved. Even though you may not be showing homes to your buyers until they speak with a loan officer and are pre-qualified, there are 3 very helpful pieces of advice you can give your buyers early in the process. This advice could save you and your buyers headaches and heartaches.

3 important warnings to your buyers:

  • Don’t quit their jobs even if they have new job offers. They need to speak to their loan officer to make sure everything is in place and the timing is perfect for the job change and successful close of escrow.
  • Try not to apply for any new credit within 90 days of writing an offer. This will save them the trouble of explaining inquiries on their credit report.
  • Do not to move or shift around money from one account or another within 60 days of writing an offer. Buyers should keep their money where it is at. Their loan officer will be able to advise the simplest way to consolidate their funds. This will save them the trouble of explaining and documenting unnecessary movements of money from one account to another.

These 3 simple pieces of advice early on in the process can really help the transaction run its course smoothly.