Securing a Mortgage Loan After Bankruptcy
January 30, 2010 by admin
Filed under Mortgage Loans
If you have recently filed for bankruptcy, your low credit score does not look good to lending agents. If you need a mortgage loan after your bankruptcy, you may feel that there is no way to get the financing you need. Fortunately, buying a home with bad credit is possible with time, verification of your income, and a down payment.
The most important factor is time. After you file for bankruptcy, a lending agent will probably request that you wait at least two years after the bankruptcy discharge before you can qualify for a mortgage loan. Over those two years in waiting, you should be sure to make all payments on time and assure that they are properly reported to your credit agency. After this waiting period, you should have raised your credit score and lenders are likely to grant you the loan you need.
It is possible to get a mortgage loan sooner than two years after the bankruptcy discharge. However, in order to qualify, you must have a nearly perfect payment history since the discharge of your bankruptcy, proving to the lending agency that you are trustworthy and will be able to repay the loan. In addition, you will probably be required to put down a down payment. The loan agency might not even require a large down payment; in some cases, they may approve you for a loan even if you only have a down payment of 3-5 percent.
If you do not have the down payment up front, consider consulting a down payment assistance program. These assistance programs are designed to help you obtain the money you need in the form of a grant or with the help of the seller or owner of the property. Other potential buyers borrow money from relatives to pay the down payment, then repay the relatives after financing the house and taking out a 2nd mortgage, or take a similar action by cashing out an investment. Be sure that when borrowing money from loved ones, you do not violate any of your lender’s regulations regarding fraud.
Commercial Mortgage Loans
January 30, 2010 by admin
Filed under Mortgage Loans
Credit tenant lease (CTL) financing is a very unique and very specialized type of commercial mortgage lending designed to provide funding for the purchase, refinance and construction of real estate that is triple net leased (NNN) to credit worthy tenants.
Unlike traditional commercial mortgage lending CTL loans are underwritten based upon the financial strength of the tenant and the structure of the lease rather than the underlying value of the property and the credit of the borrower. With CTL loans the lease and the income it guarantees is the primary collateral that backs up the loan.
Because of the straight forward nature of CTL financing these loans offer NNN investors several significant benefits.
- Highest Loan Amounts
CTL lenders generally make no restrictions on loan-to-value and will lend up to 100% LTV. There are also no restrictions on loan-to-cost (100% LTC) for construction loans. The only stipulation is that the rent collected must cover the mortgage payment. (Debt-service-coverage ratios [DSCR] are very low, typically 1.01-1.05) CTL financing offers the very highest possible loan amounts. The amount of potential leverage is unrivaled in the commercial real estate industry today.
- Speed of Execution
CTL lending is a streamlined process that takes much less time than bank loans or other typical commercial mortgages. An average CTL loan can be closed in 60 days or less from-start-to-finish. Loans from Wall Street bankers, Hartford insurance companies and commercial banks are notorious for being drawn-out, bureaucratic affairs that can take 90-200 days to close.
- Non-Recourse
Property owners appreciate the fact that CTL loans are non-recourse mortgages. The lease is the collateral; lenders won’t be coming after borrowers if something goes wrong.
- Long-Term Financing
The term of a CTL loan is usually co-terminus with the term of the lease. Many tenants sign 10, 20 or even 25 year leases. CTL financing is often the last loan an investor will ever need. If they sell the building the new owners can simply assume the CTL loan. If the keep the building they won’t have to worry about refinancing for a very long time.
- Fixed Rate, Self Amortizing
Virtually all CTL loan rates are fixed for the life of the loan. Investors can confidentially plan for the future because they know for certain what their debt service is going to cost. CTL mortgages also self amortize over the loan term, so property owners do not have to worry about coming up with money for balloon payments.
- Construction Financing
Almost all other lenders have significantly curtailed construction and development funding, but CTL capital s still readily available for financing the construction of buildings that will be leased to investment grade tenants.
- Many Tenants Qualify
The US Government is still the ultimate “credit tenant”. Anyone buying or developing a building that will house a government administration office or a federal court house will find it relatively easy to secure a CTL loan. In the private sector several retail firms meet the requirements for CTL financing as-well. The drug store chains Walgreens and CVS are among the most popular as-are the home improvement giants Home Depot and Lowes. Wal-Mart is also a very prominent CTL financing candidate. Virtually any real estate tenant that enjoys an investment grade (BBB- or higher) credit rating from one of the major credit agencies, and rents space on a NNN basis can qualify for CTL lending.
Foreclosures Rise on “Good” Mortgage Loans
January 30, 2010 by admin
Filed under Mortgage Loans
We began hearing about rising foreclosure rates on mortgage loans a couple years ago. Most of the problems were due to so-called “bad” loans where lenders greedy for fees and profit granted home loans to people who didn’t have the proper financial qualifications. A few experts had been warning of the upcoming crisis since 2000 but were drowned out by the excitement of a rising stock market and ever increasing corporate profits. Questionable mortgages were bundled into sales of financial paper and sold in financial deals that made no sense to anyone who looked closely at those transactions. Problem was – no one in regulatory agencies looked closely at the increasing levels of risk financial institutions were taking.
The scenario has changed drastically in the past year. Although most people still think of foreclosed homes as bank takeovers of loans that should never have been granted, that is no longer the issue. Those loans have been foreclosed or refinanced or bailed out. The rising rate of foreclosure is now affecting fixed rate loans for those who did qualify and have often paid their mortgages faithfully each month for years.
These aren’t homeowners with rising interest rates. These are homeowners who have lost income through disappearing jobs and closing businesses. There is no loan modification that will save the home of someone with no money coming in to make payments. This is complicated by the decreased value of homes across the country.
The numbers are staggering. It is estimated that 25% of American with mortgages owe more than their homes are currently worth. In the past, a job loss might force the sale of a home for a family’s financial survival. When homes have lost 20% or more of their value and there is a glut of homes for sale, selling to pay off the mortgage is not an option for many.
The best guess of economic experts is that 1 in 7 of mortgages in the U.S. are past due. Homeowners may be paying one month late or skipping a month and then trying to catch up. Lenders have agreed to help struggling homeowners but that help is often only a gesture or page on a website. In reality, there is little help available.
Homeowners may be at greater risk (if you can imagine anything worse than the current reality) in 2010. Mortgage lenders who have postponed foreclosures on homes where payments are still being made but are running behind may well decide to escalate foreclosures. This is expected to happen and the resulting increase in bank owned home inventories will further damage home values in many parts of the country.
Government efforts to slow the foreclosure landslide have done little more than put a bandaid on a life threatening wound. Without the will to stop banks from foreclosing quickly or to force reductions in interest or payments for the short term, the government efforts have had little or no effect.
The massive amount of paperwork required to apply for government bailout help is more than many homeowners can stomach. Those who do put together a package request aid under Obama’s foreclosure bill report no help from their lender and say they are unable to reach anyone with the knowledge to help them complete the bailout process.