BlaqK20

This might not be a technical question, but rather a personal one.

I have been thinking about getting into the mortgage business for a little time now. Could you tell me how you started? I'm planning on interning for an office for a while and then seeing if they will hire me. The other way I found is to apply and become a telemarketer for some time until the company you work for will take you in as a loan office.

What advice, coming from where you are now, could you offer me? Should I get a real estate license? What can I do to make the process easier?
Thanks.

NoSoup

Well, believe it or not, but I actually got started as a teller at a Credit Union, and worked my way up. Once I got my foot in the door there and showed my sales ability, the Credit Union moved me into a position that would be more benefitial (read: profitable) for them. My job then consisted of doing pretty much everything - opening all types of accounts, opening, closing, and drawing from IRAs, consumer lending (vehicle loans, boat loans, ATVs, RVs, personal loans, ect) and a bit of 2nd Mortgages.

I was then offered a job as Assistant Manager of the Mortgage Lending Department of a national bank, which is where I became much more familiar with mortgages. I stayed there for a while, but then finally decided that it was time to start being a broker.

Hmmm... Advice...

First off, expect no training. If you can find a brokerage that does offer training, that's great, but at least around here you pretty much rely on previous experience. Admittedly, brokering is completely different, so it doesn't really help as much as one would like.

Secondly, you now have to take a licensing exam for you Loan Originators License, as well as take continuing education classes... get it over as soon as possible - the classes often fill up near periods of renewing.

I would recommend you don't get a real estate license - I'd recommend taking the classes, as knowlege is especially important in this business, but forego the test for the license. If you are not licensed, you have plausable deniablity - if you are licensed, you can be held responsible for any errors on any offers to purchase that pass through your hands - which will hopefully be a lot

Hopefully that answers some of your questions - if you have any more or want me to clarify, just let me know

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BlaqK20

Thanks that was a lot of helpful information. I'm kind of new to all the structural parts of loans and mortgage in general. Could you explain to me how brokering is different?

NoSoup

Well, if you are not brokering and doing mortgages it is likely you are working for a Bank/Credit Union. If this is the case, it is likely that the institution you work for is actually lending the money. This allows you to have a lot more flexibility with your own products, get exceptions much easier, and you personally only need to know one institutions products.

A Broker, however, does not typically lend money. Basically, my job is to find a client, find that client a lender, and hook them up. I take care of the application process, obtain information/verifications from the borrower(s) Work some figures - and sometimes magic, lol, but in essence I am just the face that the customer knows. I have to know - with intimate detail - products offered by many different companies (currently we work with nearly four dozen lenders, each lender usually has a large variety of products. One that we work with has over 700 programs) I need to figure out which product/lender will suit the customer best, be it the best interest rate, highest loan to value ratio, or just getting the deal closed. I have very little flexibility when it comes to getting exceptions, and the closing and funding is dealt with by Title Companies instead of the brokers. In most instances (of course, there are ALWAYS exceptions) the title companies will be in charge of getting the closing docs drawn up. In a typical purchase transaction, you need to find a date and time that works for the buyer(s), seller(s), real estate agents, title company, and yourself.

Simply, brokers buy and sell money at different prices, which leads me to the next point - we are paid vastly differently than most, if not all, institutional employees. Most brokers are straight commission, and the way you get paid takes a bit of getting used to. We can be paid by the lender, the borrower(s), sometimes even the seller(s) - or a combination of all three.

You'd want to make sure that you have the following characteristics before you even consider brokering -

• You deal with rejection well
• Salesperson at heart
• Willing to put in long hours when necessary
• Handles stress well (very important, probably the number one reason some people don't hack it)
• Comfortable with a fluctuating salary - with enough savings in the bank to handle a couple bad months
• Network well (a significant portion of business is obtained from referrals)
• Learn quickly - the rules constantly change
• Creative thinking - this will come into play when you are financing a bit more creative deals...

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BlaqK20

I have to admit, the first time reading this after your post, I was confused and didnt understand a word. But now that I started doing some actual work at the office I'm starting to get the drift now, and came back to this thread at 5 in the morning to re-read it.

I'm actually a bit more curious about the real estate license theory. At the office I work at, you actually receive a little more commission given that you have a real estate license. Now I may not be that experienced to know when and where a real estate license might come in handy, so if you can point out and example that would help clarify it a lot, as well as how it could be worse.

NoSoup

Hopefully the reason that you had difficulty understanding wasn't because it was poorly written

Again, I lend primarily in Wisconsin, so the rules may be a bit different wherever you are.

However, the reason I personally don't have a real estate license is because (first and foremost) there is no advantage as far as a higher commission. Secondly, you are able to be held responsible for many additional things - especially things that you have no control over.

If you have a real estate license in Wisconsin and are a Broker, you are required to check every real estate document you come in contact with regarding your deals. If there is an error, you can be held liable because you are licensed, even though you didn't draw it up or have a say in any of the terms. Because you are a licensed in real estate, you are responsible for double-checking all the documents to make sure they are correct. Obviously, you are going to want to do this anyway as the loan officer, but as long as you are not licensed you can't be held responsible for any errors that may come up.

I am not sure if you are maybe a bit confused on the specific terminalogy, but I belong to the Realtors Association - but you do not need a real estate license to do so.

Hopefully that clears things up a bit. If you have any more questions, don't hesitate to ask!

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THGL

I have a loan question. Just signed a home equity loan ($20k, 10 yr., 8.49%) so I can pay off my wife's credit cards (she racked them up before we were married). Anyway, the monthly payment is $247.95. If I pay $300/mo. how much will I be saving over the life of the loan (or how much time will I cut off the 10 yrs.)?

Thanks!

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Yakk

If I know what kind of rates I can get, is there an easy calculation (debt-load? percent of income going to pay interest?) that can tell me round-about (just a rule of thumb) how much credit I can get?

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greeneyes

Most banks will not let you go over 40% debt-to-income. Here is the "quick and dirty" way to figure DTI:

Add up your monthly expenses and divide by your monthly gross income.

It should be noted that if you have revolving credit lines, you cannot just figure your monthly payment. The bank will figure what your maximum payment could be because you could max the line out at any time. Most banks takes your maximum credit line amount and figures 2% of that, I've seen some banks figure as high as 5%. So your maximum payment on $2,000 using the 2% rule would be $40.

Also, the bank does not figure in things such as child care, groceries, gas, or utilities. Here is an example of a typical household:

Monthly Gross Income: 2500

Mortgage: $900
Student Loan: $50
Vehicle #1: $200
Vehicle #2: $350
Visa: $40 (credit limit of $2,000 - take 2%)
Retail Credit Card (such as Home depot): $25 (again, take 2% of total credit line)

Total: $1,565

Divided by $2,500: 62.6%

Also, if you are refinancing the vehicles, then you wouldn't include those in the monthly expenses because you would be paying those off with the new loan.

Hope that was clear!

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Yakk

Thanks greeneyes!

The 2% number is interesting. 2% to 5% works out to a 27% to 80% annual interest rate.

27% isn't far off for a credit card -- enough to pay interest and some left over to deal with principle, and some swing-room if you are a fool and start getting penalty rates.

However, do banks pay attention to the interest rate on the debt source?

Ie, if you have a revolving line of credit at 7%, would that be factored in at 0.6% to 1% per month? (0.6% per month is a small bit bigger than 7% per year)

Is that 40% of income pre or post income tax income?

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NoSoup

If you make payments of $300.00 per month, you'll have it paid off in about 7.5 years (90 Payments.) You'll save approximately $2636.10 in interest over the life of the loan as well.

Whenever you can afford to pay extra on any loans you have out, do so - you'll save quite a bit in interest over the life of the loan.

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NoSoup

They typically do not take into account the interest rate on revolving lines, using the % as the minimum payment. However, different institutions have different policies. For instance, every place I have worked only uses your current debts to calculate your debt to income ratio - where some others will utilize the total amount of credit you have available to you to calculate your payments. In addition, I have always used the minimum payment reported to the credit bureau - which is usually quite a bit less than the 2% minimum.



As far as the 40% goes, we use gross income - or pre-tax.

Hope this helps

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BlaqK20

Okay, I have a new question. I ran into a client who wanted something in regards to his "Home equity line"...I'm pretty sure this is something everyone knows, but I'm clueless as to the mortgage lingo. What does that mean and what do you do with a "Home equity line" ?

Thanks.

Yakk

"Home equity line of credit". A line of credit secured against the equity in his home.

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NoSoup

Yep, Yakk is correct.

He meant a Home Equity line of credit (sometimes referred to in the biz as a HELOC)

Basically, it is an open line of credit secured by real estate - very similar to a credit card - except if you don't make these payments, they can take your house

Depending on the institution, there are a variety of different ways that Helocs work. Most come with checkbooks - when the check is written out, it will simply be added to your loan balance, and now many companies are coming out with credit cards that you can use.

Payments are calculated similarly to credit cards as well, with a minimum payment of $X (normally $50.00) or a percentage of the balance (normally 2%)

Hope this helps

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BlaqK20

Ok, so I think I get this. It's pretty much a credit card, but instead the amount you take out just adds on top of your home value/equity?

I do have another question.
In this case I have a client who is doing a refi with another company, which we will call company A. He did the docs, got approved and all that and the title company recorded the refi. Now what if he changes his mind? Say, he decides its just not what he wants and he wants to pull out? I know that there is a 3-day grace period where you can retract, but I also hear that as long as you did not receive the money in your account (he also took cash out) you can still fax in a cancellation letter.

Now say, it has funded, and everything went through. Is there still a way to undue the loan? What consequences would there be, or what would be the simpplest, fastest way to undue the process?

Reason I'm asking is because one of my clients is in this situation and company A provided him with a good faith estimate for a 30 year fixed rate, but at the end they were only able to give him a 2-year arm. At that moment they convinced him that it was the only option he had so he signed. But now that company B is able to provide him with the plan he originally wanted, a 30-year fixed, what can he do to switch? Since company A already funded and it has been more than 3 days?

Yakk

Close! Money taken out of a HELOC (Home Equity Line of Credit) subtracts from your home equity, it doesn't add to it. =)

Money taken out of a HELOC adds to your home debt.

Situation 1:
Morgage: 100,000$ @ PRIME - 1%
House value: 300,000$
HELOC max: 100,000$ @ PRIME -0.5%
HELOC current balance: 0$

Home Equity:
200,000$
Home Debt:
100,000$

Situation 2:
Morgage: 100,000$ @ PRIME - 1%
House value: 300,000$
HELOC max: 100,000$ @ PRIME -0.5%
HELOC current balance: 50,000$

Home Equity:
150,000$
Home Debt:
150,000$

A HELOC is sort of like a morgage that you can take money out of.

The advantage of a HELOC is that you don't pay money on money you don't need.

The disadvantage of a HELOC, outside of the usual dangers of credit, is that it eats into your house's equity, and the debt is guaranteed against your house.

But, really, if you have no plans to go bankrupt (depending on juristiction), and have debt and house equity, rolling the debt into a HELOC is often a good idea. It is better to have low-interest debt than high-interest debt.

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NoSoup

I think you have it, but I think the terms are a bit off. It's pretty much a credit card, but it utilizes equity in your home as collateral. The amount you take out actually reduces the amount of equity you have in your home, as you have more borrowed against it. Does that make sense?

Federal Law mandates that (with few exceptions) refinances are required to have a three day grace period called a recision period. In essence, the borrower has up until midnight on the third business day after the loan closes to cancel the loan. If it isn't cancelled by that point, the loan goes through. Unfortunately, since the three days have passed without the borrower recinding, he's out of luck, whether or not the money is in his account.

Fortunately, you can still refinance, although the broker who just did the loan isn't going to be happy. Due to RESPA regulations, the broker should have had to redisclose the change in the terms of the loan, as well as had a new application signed. So either the borrower didn't really pay attention to what he was signing or the broker is out of compliance.

One thing you would want to make sure with the customer is that it is beneficial for him to refinance so quickly. Two year arms are usually used in B/C Lending (at least in Wisconsin) so it may be beneficial for him to improve his credit before refinancing, and hopfully get into a conforming loan program. If that isn't the case or there was some other reason for him to go on the ARM, find out what the borrowers intentions are. If he is only planning on living in the home for a couple more years, it may not be in his best interest to go on a 30 year fixed. If he isn't sure what is going to happen, it may be better for him to have the security of a long term fixed loan.

One advantage you have over the other lender, though, is the fact that you are going to be dealing with a rate/term refinance rather than a cash out loan. The programs are usually a bit better and he'll likely qualify for a better rate as a rate term, not to mention paying less in fees.

I'd suggest working out a cost/benefit analysis for the borrower, and show them exactly what it is going to cost them to refinance, how much they'll save over the long run, and approximate the time frame for them to break even with the closing costs. (For example, say he is going to end up paying $2000.00 in closing costs, and is saving approximately $80.00 a month on average over the life of the loan. If he sells the property before 25 months are up, it would have been better for him to keep his current mortgage. If he stays there longer, it will be beneficial for him to pay the costs now and refinance, the longer he stays there, the more he will have saved.

******

Although I am no expert, if he isn't B/C, you may want to wait a few weeks before you lock the rate. It looks like there is a small squeeze on the 2-10 year bonds, which should cause rates to dip temporarily. I would imagine we might see that dip in late August or Early September.

Good luck, if you have any more questions, let me know!

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BlaqK20

Thanks, that was very detailed. What do you mean by "b/c"?

NoSoup

B/C is just another Tier of Mortage lending. There are Four Main Categories -

Conforming - Purchaseable by Fannie Mae or Freddie Mac - most large servicers specialize mostly in these loans. ABN-AMRO, Chase, Countrywide, are all examples of these lenders.

Portfolio - These loans are specifically held by the institution that lends the funds. The advantage of portfolio products is that often they allow for specific expections to be made - often considered "niche" products.

B/C - B/C Loans are typically for poor/no credit, but can also be used in specific circumstances where someone would qualify for a conforming loan, but for whatever reason B/C may suit them better. An example would be a 100% loan with no private mortage insurance. B/C loans typically take all the rules of conforming loans and turn them upside down - in exchange for higher rates or poorer terms.

Government - These loans (while there are exceptions) are typically used when someone wouldn't qualify for anything else. The most common government loans are WHEDA, VA, and FHA. These are the most regulated loans in the industry, and must adhere to more specific guidelines than the others. An example is handrailings - if a home does not have a handrailing in ANY area there is more than one step, it is not able to be used in conjunction with a FHA (Federal Housing Act) Loan.

Hopefully that clears things up a bit

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BlaqK20

Starting to make some sense out of it...

But I did run across a few more acronyms/terms that I still dont know what they mean.

I forgot the other ones, but one of them was LIBOR?
What does this and other similar terms like that above mean?

NoSoup

LIBOR is simply and index often used in Adjustable Rate Mortgages. There are many, many different indexes that can be used, but LIBOR and Prime are the most common. Libor stands for London InterBank Offered Rate - and adjusts based on a huge variety of factors. The different indexes are often dependant of different factors, although on a large scale view they typically will follow each other - some faster than others.

Hope this helps a bit...

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hambone

Stupid situation. I have a student loan with Sallie Mae. I always pay the thing on time, no problems. Well, for the last couple months I just plain forgot. The emails they sent me telling me my bill was ready looked just like the spamlike mortgage emails I get from them, so I passed them over.

Anyway, I finally checked into the site today, and what do you know, I am 64 days delinquent. Really the money wasn't a problem, so I payed all I owned, plus the next months right away.

My question is, what does this mean? I am pretty sure they report this stuff every 30 days right? So that means I would have been reported as delinquent twice I think. How big of a deal is this for me?

Thanks.

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NoSoup

Well, my friend - it ain't good.

You're correct, typically it is reported every thirty days delinquent. As such, you likely have a 30 day late and a 60 day late reporting to your credit bureau. Those lates are likely going to cause your scores to drop substantially - specifically the 60 day late - for at least some time. The lates will continue to have an impact for the next seven years or so, but it will lesson over time.

Since I don't know if you have established any other credit, I can't really say for sure how big of a deal this is. However, I can tell you that it is something that you can recover from, and it isn't going to plague you for the rest of forever. Unfortunately, if you don't have much - if any - other credit out there, it will be much more difficult to get approved for other credit offers, or at least decent ones.

However, there may be a ray of hope - if Sallie Mae may not have reported you as late. With student loans especially, I have noticed that some people's reports are dead on while others said they have been late - although it doesn't reflect that on the credit beauru. Hopefully you're in the latter category.

Good luck - if I can help anymore, let me know

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hambone

thanks. i generally have great credit (so i have been told) and my wife's is even better. Hopefully not too big of deal

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BlaqK20

I think I get what LIBOR means now. Well not exactly, but I'm guessing its just another index that they go off from. Is there any reason why Prime, and Libor are the two most common ones?

Another scenario. I have a client who's credit is sub 500. About 490 is what he told me. Now he is in a dire need of cash but there is nothing I can do with him, even with hard money lenders (due to high LTV), unless his credit score raises back up to 500, or above. Now he has his mortgage, a few credit cards, and a sears card on the report. What would help him raise his credit the quickest? Paying the balance from one company, say sears, off completely? Or just making the monthly payments on each?

NoSoup

The Prime and LIBOR index are most common simply because lenders make them - they could use any number of indexes to base their rates on, but choose those two most frequently. I'm sure there is reasoning behind it - and I would be willing to take a guess and say that those two indexes are the most likely to stay ahead of the bond market.

As far as the scenario goes, I can't help you very much without either obtaining more information or actually seeing the credit bureau.

If you want to do it the hard way, I'll need these answers to help you determine what would increase his score the fastest.

What are all his open tradelines?
High credit limit on each tradeline?
Current balance on each tradeline?
Is he currently delinquent on anything? If so, how delinquent?
LTV that you are looking for, and what are you doing with the cash out? Are you using it to pay down his debts?
Current FICO scores from transunion, equifax, and experian...

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Poppinjay

Hi NoSoup, I have some questions...

I am not a finance head. We've gone through some real oddities through the past few years. First off, I'm amazed at how sharp some lenders are and surprised how sloppy others are. I found out that the loan I had on my Jeep was going four months into arrears even though it was paid off. What tipped me off was the notice that it may be repossesed. I called, left a message of hellfire and brimstone, got a short note saying it was a mistake --NO APOLOGY--

But that's just the tip... whenever my wife and I apply for a subsantial loan, mortgage etc. we are told we have scores in the 700's. Our ratio is extremely tight because we have student loans up through grad school, and in fact would like to take on more so we can really get into the high earner category... but we drive old beaters, we wear unfashionable clothes and wear old shoes so we stay on the line. The thing is, we get turned down for this, approved for that. We bought a house at a great rate, looked at consolidation of all debts, and didn't even get the courtesy of a return call. I purchased an anniversary ring for our 1st, was turned down for a jewelry company loan, but had much more than the cost available in credit. I bought it for cash, which left us a little dry for books that semester. But, we graduated.

Another niggling thing is a credit card I paid off five years ago that still pops up on reports as being unpaid. I have the final statement, but I sure hate toting it around after four moves. I called them after the last time and threatened court action, but lenders have ignored that part of my report and believe me when I say it's wrong. This card company was bought out twice as I was closing it out. Why do we get turned down for penny anty things, but approved at low rates for big things? Also, how is it that so many things slip through the cracks that could seriously hurt us?

Thank you for this thread. It needs a bump frequently.

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NoSoup

[QUOTE=Poppinjay]Hi NoSoup, I have some questions...

I am not a finance head. We've gone through some real oddities through the past few years. First off, I'm amazed at how sharp some lenders are and surprised how sloppy others are. I found out that the loan I had on my Jeep was going four months into arrears even though it was paid off. What tipped me off was the notice that it may be repossesed. I called, left a message of hellfire and brimstone, got a short note saying it was a mistake --NO [QUOTE]APOLOGY--

The reason you get such great rates on many of the big ticket items you purchase is because typically interest rate is based on your credit score more than any other factors. Because you have great credit, you qualify for very low interest rates. However - the reason you are likely being denied credit for other things is because of your high debt-to-income ratio. It has little to do with your credit standing, your ratios are probably just too high for the lenders guidelines. Additionally, often times there are more flexible programs for big ticket items - such as a house - than there are for a typical credit card or smaller end item.

As far as things falling through the cracks that potentially hurt you....

Unfortunately, it's the way the system is set up that makes wrong information damaging a lot more often than it is helping. Everyone starts with a perfect credit score, and pretty much everything you do related to credit damages that score. Although I can't say I've never seen incorrect information help a score - more often then not the information will damage it.

The reality of the situation is that credit reporting agencies have to rely on lenders to report information - and unfortunately they sometimes don't report it correctly. Because of the sheer number of people they keep track of, getting that information fixed often is a lengthy and frustrating process. What I would recommend doing is contacting the credit reporting agencies and asking for the form to report incorrect information on your credit report. It may take a number of days to get done, but they have to verify it or remove it within a set amount of time. The nice part is, once you get it taken care of from the credit reporting agency's side, it should be taken care of for good.

As far as lenders ignoring what you say is incorrect, they probably will continue to do so. There are very few institutions, if any, that will take your word for it without any proof of what you are saying. I know it may be frustrating, but a lot of people will tell you that the poor marks on their credit reports are mistakes, when at least a significant portion are not. Lenders pay for the ability to pull a credit report - they should have every right to expect that the information on that report is accurate.

Hopefully that helps - if you have any more questions, please let me know

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erin1283

hello my creidt sucks. i am 21 and my score is around 500 last time i checked. i need a unsecured loan of about 3500 for debt consalodation/student loans. i am currently working as a nanny under the table and have no checking account only savings. i will be a full time student in jan at a nursing school. i have about 4500 in debt from credit cards. i cant seem to get a loan anywhere i've applied at lots bad credit site on the internet and been to my own bank. i dont know what to do is my only chance to get a cosigner. i dont really have anyone i can go to to cosign . i need the money soon and dont wanna have to go to a bookie or declare chpt 13. please any advice is welcome

NoSoup

Well, it seems you are in quite the dilema. As far as getting a loan is concerned, from the information you provided (no documented income, low credit scores) a cosigner is very likely going to be your only option to get a loan from a bank. Another option you may want to consider is borrowing the funds from a family member or friend, but make sure that you draw up a contract to protect both of you.

I'm not really sure why you think you would need to declare bankruptcy, as you don't have all that much debt. Judging by your credit scores, I'm going to assume that you have collections out there. If you do, in fact, have collections, I would contact the companies and see if you can negotiate a lower amount due and/or a payment plan.

Hope this helps - If you have any more questions, just ask!

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wouql

Hey NoSoup...this is a great thread you've got in here.

Here's my situation: I'm 21 years old and I'm going to graduate from college in May. I'll be starting a nice job when I graduate (~$60k), and I'm single, so I should have plenty. I've worked there since last summer and I'll stay on part-time until I graduate (in about 6 months) when I'll become salaried. My credit score is in the mid 700s, but everything on it is extremely new; a credit card that's been active for ~6months (always paid in full every month), and roughly $10k of deferred student loans.

What I'm wondering is: I've gone my entire life without a car, and frankly, I'm sick of it. The nanosecond I can afford it I'm buying a car. My question is: Is there any chance I'd be able to secure an auto loan now, instead of in 6 months? My salary until May is only about $900/month since I'm a student and working very few hours (this has also been my income for the last 6 months). Does an offer letter from a company make any difference when applying for a loan? (I'm sort of assuming it doesn't, since it could theoretically be withdrawn at any time.)

Do you have any advice for me? I'm desperate to find a way buy a car now, and not in 6 months. In addition, I don't really want to buy a used or ultra-cheap one, since I'd be able to afford a much nicer one when I graduate.

EDIT: Two things I forgot to ask..... do they count student loans/financial aid packages as income? I remember my landlord did just that when I got my apartment (I hadn't even known you could do that; seemed kind of strange to me) but maybe I can benefit from it again? It's all in one big lump sum though, so I don't know how you'd count it "per month."

Lastly, do you have any opinion on financing online vs. through an actual bank/credit union? I belong to Bank of America, but online seems a lot easier.

Thanks again.

NoSoup

To be honest, I'm not sure if you'll qualify for financing or not. Typically, I would say you wouldn't, but you have very high credit scores. Depending on the lender, some lenders are willing to overlook your actual income and give you a loan based solely on the fact that you have such high scores, meaning the chance you'll default is very low. However, many of the lenders that do that are going to require additional credit history, though not all do.

One thing you may want to consider is obtaining a co-signer, even if it is only for the time being and you refinance the vehicle once you become a full time employee. Another option would be just to purchase a "beater" or a cheaper vehicle that you can sell six months down the road for around what you paid for it. The value of a 10 year old vehicle is going to fluxuate very little over the next six months...

Most lenders are not willing to consider financial aid as income, although some might. The same goes for your letter of intent with your employer. However, smaller, more creative financial institutions - such as a local credit union - will have a greater chance of being swayed by such things. Another option, although it isn't one I would recommend - is a high risk loan. You'll be paying an absolutely ridiculous interest rate, and may even be limited on the vehicles you can purchase, but they'll lend to almost anyone.

Although this may not be what you want to hear, If you must get a vehicle now, I would go with a cheap used vehicle, at least for now. Hopefully, nothing between now and the time you secure your position would happen, but if it does, you (and potentially your co-signer) may be put in a postion that will ruin your credit, or at least make life difficult trying to keep up with a high payment.

As far as actual banks versus online companies, the choice is mainly personal, providing the institution you secure your loan from online is a reputable one. If you were to finance through a local bank or credit union, you'll have a place to go in person with any questions or problems with your account. However, often times online lenders are able to offer lower interest rates because they don't typically have the expenses of a brick and mortar institution. In situations such as yours, though, I would imagine that a smaller local credit union or bank will be more flexible with their financing options than a national company - be it online or not.

Hopefully this helps, if you have any more questions, please let me know!

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aceventura3

Thinking about investing in residential rental property. Do lenders use debt to income ratios the same way when buying investment property as compared to buying your own home? What percent down payment do they like to see on investment property?

NoSoup

Lenders typically do use debt to income ratios when underwriting an investment property, however, there are programs out there that do not. Typically, they will include the rent from the property as income as long as you have a lease signed with the tenants. They do not use the full rental amount, but a pro-rated amount based on the vacency factor in your area.

As far as the downpayment on a rental property, typically they want to see more down than when purchasing an owner occupied residence. 30% or more down is ideal. However, there are exceptions to every rule, and some lenders have programs that will allow you to finance 100% of the purchase price of the investment property. Be careful, though, as often times the rates are substantially higher because the lender is taking such a large risk.

If you have any more questions, just let me know!

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Cynthetiq

Thanks NoSoup, good info up there.

Here in the NYC area if you are talking about 5 family residences and higher it's 50% down and a substantial amount of liquid cash in the bank (I forget the actual amount but it's in excess of $1M IIRC.)

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NoSoup

Ah, sorry - I should have clarified. Cynthetiq is correct.

What I state above applies to "Residential investment properties" - which are typically properties that house anywhere from one to four families. If is is more than a four family dwelling, it fall into the category of Commercial loans, which is an entirely different animal.

The information I provided, of course, is typical in Wisconsin - lender policies may vary from state to state.

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NoSoup

(Taken from this thread.)

Construction Loans typically work a bit differently than conventional mortgages, they are more similar to a Home Equity Line of Credit.

Basically, once the construction loan is closed, there will be an initial dispursement of funds to the contractor. For Example, say you have a $300,000.00 construction loan, the builder will typically want money to start. Say he asks for $60,000.00. You will close the loan and take an inital "draw" of $60,000.00. Normally, during this initial draw, you will be required to purchase the land you are building on. However, in your case, you already own the property, so it doesn't matter. The builder will then spend that money, and down the road ask for another draw. Here in Wisconsin, you have very little to do with any of that, the builder simply works with the Title Company to get the funds when required.

As far as your payment is concerned, contruction loans are typically interest only based on the amount you currently have borrowed. So, in the case above, your payments would be based on a $60,000.00 balance, interest only, until the builder requests more. This should help you pay your existing mortgage, as your payments will be lower than if it was amortized over a specific period of time.

Be careful, however, as often there will be a set number of free draws and the title company may charge you for additional ones. I have seen fees for this range from $50.00 to $500.00 per draw. Each draw can be multiple checks, but each seperate instance of the builder requesting money is considered a draw.

To clarify, your builder requests a draw for $60,000.00 on March 1st. He wants $30,000.00 for himself, $20,000.00 for the excavators, $5,000.00 for the utility company, and $5,000.00 for permits. This would only be considered one draw. However, if he went on March 1st and got himself a $30,000.00 check, March 3rd to get a $20,000.00 check, etc. they would all be considered seperate draws.

Once you have completed your home, you'll likely have to refinance into a different type of mortgage. The only exception would be if you happened to utilize a "One-time Close" construction loan program.

Depending on how quickly homes sell in your area, I would plan accordingly. Ideally, you'll be able to time it just perfect so that you can move out of your old home and sell it just as your new one is finished. However, it is very unlikely that it happens that way. Even if it does, it is likely that the buyer of your home will take that into account when putting the offer in, and you may potentially get less than what you would have for your home.

One option you may want to consider is giving your current home plenty of time to sell. If, in fact, it does sell before your new home is completed, would it be possible to stay at a friends or relatives house for a short period? If it isn't are there any apartments that offer a month-to-month lease in your area? You would want to make sure you keep in mind the cost of the apartment/storage vs. what you would be paying on your mortgage or how much less the seller would offer if they had to wait to move in, but often times it will be better to be "homeless" for a brief period rather than carrying an extra mortgage payment until it sells.

Another advantage of selling your home prior to your home being completed would be that you have the cash in hand, and can apply it to the new property before you refinance it into a standard 15 or 30 year mortgage. Providing you have the equity, you should be able to reduce-possibly even eliminate- private mortgage insurance.

Hope that helps a bit, if you have any questions, let me know!

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AZrunner43

Hi NoSoup!

When I moved to Phoenix from Chicago a year ago, I used up most all of my funds to get established in the new location.. when it came time for my friends bachelor party, my only option for cash was a ($400) advance from my only credit card. This was June '05. I've since used the card for furniture, plane tix home, etc.. large purchases. Now I'm around $3000 of my $3500 limit. From what I understand, a $100 payment on my card covers the interest first (nearly $40) and the remaining $60 will go towards the principle. Furthermore my entire credit balance must be paid off before any of the payments will go towards my cash advance balance - and the cash advance interest is (of course) killin me..

My question is this: Would it be wise for me to open a 2nd card - a 0% APR for 12 month card offered by my bank - and use it to pay off the balance in full? In that scenario my first card would be paid off and I would have 12 months of interest-free payments on the balance of my 2nd card.. (now that I'm firmly established in Phoenix with a good job) am I correct in all this? I'm 23 and don't want to dig myself a hole I'll never escape.. I've been making $100/mo payments for 7-8 months and getting nowhere.

TIA!

ps i hope you were the right person to ask - if not i can repost this elsewhere in the forum! let me know, thx

NoSoup

Yep, you certainly can open up another credit card and do a balance transfer.

Of course, be careful and read the fine print when it comes to opening up the new card - avoid annual fees, ect. Once you've opened the new card, try and pay the balance off in full before the interest only period is finished.

If I can be of anymore service, let me know

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