Now even sugar daddies that marry a younger lady can qualify for a reverse mortgage. Seriously though these are actually important new rules that have come late but are very beneficial. This helps couples where one person is over 62yrs old and the other is under 62 yrs old at time of application.
PDF Document: HUD New Non-Borrowing Spouse Mortgagee Letter
All kidding aside there were people that were loosing their homes because lenders were allowing one spouse to be on a mortgage when they other one wasn’t. In those cases when the primary spouse that was over 62 years old at the time of originating the reverse mortgage passed away the surviving spouse would have to pay off the mortgage. If their family planning didn’t anticipate for that to happen then the outcome of that situation would be less than desirable.
AOL Real Estate: New Reverse Mortgage Rules Won’t Hinder May-December Romance
Reverse Mortgage Advice: Family Planning
When getting a reverse mortgage always seek the advice from a loan officer that has a lot of experience in closing these transactions. From 2005-2014 I’ve closed over 70 reverse mortgages and can tell you that these require special family planning when making the decision to get one. I’ve seen the positive impact it can have on improving the financial situation of a client and it’s feels great to be able to help people with this special program. Seek the advice of an expert especially when you have a non-borrowing spouse that is under 62 years old to understand all the important implications.
Understanding Loan Level Pricing Matrix (LLP Matrix)
As a loan officer I get asked the question on the daily, “What is your 30yr fixed rate today?” And of course the clients lead with this question before I have any details on the type of loan they are trying to get. This is a great question that doesn’t have an easy answer and here is the explanation as to why.
PDF Link To: Fannie Mae LLP Matrix
Fannie Mae and Freddie Mac have come out with something called Loan Level Pricing or LLP. It’s a complicated matrix that makes adjustments to interest rates like credit score, property type and down payment amount. They have determined that these granular details effect delinquency rates and loan losses. So to offset those risks they make adjustments to the rates. These adjustments are even across the board from one lender to another.
Example Loan Level Pricing Matrix Criteria:
- Occupancy Of Home
- High Balance Loans
- Cash Out or Rate Term Refinance
- Energy Efficient Properties
- Multi Units
- Single Families
- Loan To Value
- Credit Scores
- Term Of Loan, Number Of Years
What This Means To You
To further complicate things this matrix is constantly changing.
So if you are interested in determining what kind of rate you are going to qualify for make sure you talk to your loan officer and let them ask you about your entire file before shopping for rates. You want to make sure you are comparing apples to apples.
Notice About Advertised Rates
Beware when looking for the best mortgage rates via advertising channels like direct mail, online rate marketplaces or other types of ads. The whole point of an ad is to make you pick up the phone and call right? And the nature of a rate is that you’re always trying to get the lowest one right?
Many mortgage advertisers have learned that by placing an unusually low rate in their ads makes them stand out among the crowd and generates more inbound calls. But what happens when they advertise a rate that isn’t actually available? This is when you start getting the long winded loan officer conversation like, “Oh rates have gone up since we ran that ad.” Sometimes they will hook you in by making you pay for an appraisal and applying before locking in your rate. Then you’re already “pot committed” in the process and then when they have to reveal the real interest rate to you you’re already sick of the process and keep working with them.
Your best bet is to work with someone you either know personally or have been referred to so that the loan officer has “skin in the game.” That will ensure that you are being taken care of with rate, fees and customer service from application to close.
Recently we had a client that hit a grand slam on a multi unit investment property proving that there are still good deals out there that can be had for investors and home buyers. There are a few things that are special about this deal.
- First the client bought the property with an FHA loan. This allowed them to by an investment style home for a low down payment if they live in the property as their owner occupied property. If this was bought as a straight up investment property the numbers would still work but the financing would require a much bigger down payment. Although we are calling this an investment property make no mistake the client is required to live in the property.
- Second this property already had renters. All the new owner had to do was to introduce himself to the current tenants. There were already renters in the property that had long leases and they had lived there for a long time.
- Third this property has future development opportunities. If the client wishes he could convert it into one big single family home. This would improve the marketability of the property for sale down the road. Or it could serve as the primary residence of his family if they wish to continue to live there.
- Finally the client gets $1732 per month in net cash flow! After just 1 year he will have almost his entire down payment back not to mention the tax benefits of owning a larger property with a big tax bill.
- Purchase Price $425,000
- Loan Amount $410,125
- Down Payment $21,250
- Interest Rate 30 yr Fixed 4.5%
- Annual Property Taxes $15,358
- Annual Home Insurance $1,800
- Total Mortgage Payment PITI $3,968
- Rent Unit 1 $1900
- Rent Unit 2 $1900
- Rent Unit 3 $1900
- Rent Unit 4 Owners Unit
- Gross Rental Income $5700
Return On Equity- Over 90% return on equity in first year.
The client put down $21,250 on the property and this included his minimum down payment, closing costs, transfer tax, title fees, attorney fees and escrow setup. If his building is occupied with 3 tenants then he will have over $20,000 in profit after paying expenses which yields over a 90% return on his down payment equity. Of course this is barring nothing goes wrong with the property. But even if something does happen he is in a great position that many investors would die for.
If you are looking to increase your real estate wealth you should look into multi unit housing. In my opinion these are often overlooked as an investment opportunity because people think they are harder to finance and this is not the case. If you look to buy something that is 2-4 units then you would still fall into the conventional residential mortgage requirements and can secure atractive 30 yr fixed rate financing.
Call us to discuss how you can make this scenario work for your portfolio!
Sean O. McGeehan, Loan Officer
Special thanks to Ilona Koziel, Real Estate Agent for helping the client find a gem property like this. If you would like to use her services you can find her here.
Ilona Koziel, Real Estate Agent
There are many reasons why you should work with a commercial loan broker to secure your commercial real estate financing.
Professional Loan Package
We prepare a full submission package with all of your pertinent information that will be required by an underwriter to determine eligibility and terms for your loan. If you submit a package that is missing information to a lender or simply the wrong information they could preemptively turn down your loan because they didn’t get the information they needed in the right order. This happens all the time because banks expect you to know what they need and will not be proactive in helping you gather the right information they need more often than not.
It’s important that the banks see the right information in the right order.
Broad Array Of Loan Types Handled
- Office Buildings
- Mixed Use Properties
- Apartment Buildings
- Multi Family
- Industrial Buildings
- Medical Offices
More Loan Options
A commercial loan broker is not captive to one bank. If you go to your local retail bank and get turned down or want to get a competitive second opinion from another bank then you have to start the process all over again. With commercial loans this process is extremely time consuming and a commercial loan broker knows how to streamline this process.
Also, our interests are aligned because all we want is for you to get a loan that fits your needs. If we don’t find something for you and you don’t close then we have wasted our time.
Direct Relationship Submissions
We have a number of trusted banks and personal relationships on speed dial that we can quickly run your deal by. This increases the exposure you get through our personal network.
At the end of the day you will have more options to choose from, close faster and on better terms when using commercial loan brokers than if you do all of this on your own.
This is a standard checklist of many items that an underwriter can ask for when reviewing a new loan.
Many of these may not apply to you. However if they do you may want to start getting these together sooner than later and hand them in to your loan officer at time of application for your mortgage.
Master Document Checklist
- 30 days of paystubs
- 60 days of bank statements
- 401k, IRA , Stocks, Mutual Funds
- Home Insurance
- Mortgage Statements
- Photo ID’s
- 2012 and 2013 Tax returns
- Partnership Tax Returns
- 2012 and 2013 W-2’s
- Profit and Loss statement
- Divorce Decree
- Signed Purchase Contract
- Earnest Money Check
- Mortgage Note 1st and 2nd
- Social Security Card for Reverse
- Social Security Award Letter
- Pension Award Letter
- Bank Statement Verifying Pension and SSI Deposits
- Trust Documents for Property in Trust
- Proof of Child Support Payments
- Bankruptcy Papers
- Contract For Teachers Salary
- 1099’s For Self Employed
- Letter Stating Judgment /Collection is Paid
- Copy of Lease’s for Purchase
- HUD and NOTE from Previous Mortgage Closing Papers
- Death Certificate
- Condo Decs and Bylaws
- Appraisal info- Credit card
- Foster Child Income Documentation 12 months
- Birth Cert. for Child/Foster or Child Support
- Proft and Loss Statement Self Employed
- Mortgages statement for other properties
- Lease’s for other rental properties
- Condo Association contact info
- Purchase Explain no major purchases or credit card charges
- Purchase Explain no major deposits into bank account