Special Programs
- 3.5% down payment, lower interest rates
- Seller contribution accepted
- Imperfect credit accepted
- Easier to qualify
- Requires mortgage insurance, owner occupied properties only
- May increase monthly payment by up to 25%
- Loan amount up to $636,150 (each county has different loan limit, call our loan advisor to find out)
- Program choice limited: 30/30, 5/15, 5/1 and 1/1 ARM
After the most recent housing crisis, along with other regulatory reform, minimum standards for mortgages, including the Ability to Repay rule and a Qualified Mortgage definition was created in 2010. These were later adopted by the Consumer Financial Protection Bureau (CFPB) and put into action on January 10, 2014. The new rule provides banks and mortgage lenders with certain liability protection when originating Qualified Mortgage (QM) loans, which allows them to make home loans with less fear of buybacks, lawsuits, and financial loss. As a result, some lenders have begun to originate so-called “non-QM loans,” which as the name implies, do not comply with the Qualified Mortgage rule. This type of loan doesn’t conform to the Qualified Mortgage definition issued in 2010. Typically offered by private investors and some banks.
- Easy to qualify
- Less strict requirements on income (debt ratio up to 55%) and credit
- Alternative assets can be used for qualification
- Interested Only payment options--low payment with flexibility to pay down principal at your convenience
- Stated income loans--income not reported on tax returns can be used to qualify
- 40 year loans--lower payment and easier to qualify
- Negative Amortization ARM--low and stable payment plans
- Higher interest rates (anywhere from 0.5% to 2%)
- Loan may have shorter initial terms (1-5 years)
- May contain prepayment penalty
A reverse mortgage is a type of home loan for older homeowners (age 62+) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance. Reverse mortgages allow seniors to access the home equity they have built up in their homes now, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month. The rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years. However, the borrower (or the borrower's estate) is generally not required to repay any additional loan balance in excess of the value of the home.
- No monthly payment
- Do not need income, credit, or asset to qualify
- Receive payment from bank every month
- Restricted to seniors 62 years of age or older only
- Higher interest rate
- Deplete home equity for heirs
- Low loan-to-value ratio
- Higher loan fees, hidden fees
Lenders require that your monthly mortgage payment (principal, interest, taxes and insurance) plus debt payments does not take up more than 43% of your monthly income. This is known as the debt-to-income ratio. However, if you are looking to purchase a home whose mortgage payment goes above this ratio, we can:
- Find a lender with a higher debt-to-income ratio. There are less of them, but they do exist
- Convert your assets to “income” in the eyes of the lender. If you have investment accounts with stocks, mutual funds or bonds, we can document that to increase your income.
- Use restricted stocks to increase your income, if you have been receiving it for 2 year and there are still vestings coming for the next 3 years
- Go for Non-QM loans
Commercial Lending
Land & Construction
Lenders have very different requirements for land and construction loans. Land loans are considered by the lenders as high risk because it is much easier for owners to walk away from a piece of land than a home. Therefore, how you plan to use the land is critical to the lender. It also impacts the rate and term. Most of lenders wish to loan on ready-to-build lands, meaning that it has road, access, city sewage & water, and access to electricity. Also, a higher down payment is required.
Common beliefs:
- Land loans can be secured with 20% down payment. FALSE, requires at least 40- 50% down payment
- Any piece of land can be constructed upon. FALSE, must be improved with road, access, sewer and water--ready to build
- Any piece of land can secure a loan. FALSE, raw land is very difficult to secure financing
Apartments
In the U.S., an apartment is defined as a legal parcel with 5 or more units. Qualification for the apartment loan is different than residential loans in that it is based primarily on the apartment's income after operating expenses (utilities, maintenance/repair, administrative management... etc) rather than your personal income. In addition, complexes with 16+ units are required by law to have a residential manager, which can greatly increase expenses.
Lenders for apartment loans tend to be location-specific and may decline your loan purely based on location. Thus, the most important information to have on hand while inquiring for an apartment loan is its location, unit distribution (# units + bedroom/bathroom count), estimated rental income, and estimated operating expenses. Apartment loans typically take 45-60 days to close because appraising multiple units can take a long time.
Common beliefs:
- I make a lot of money, I can get this apartment! FALSE, the loan depends on the apartment's income, not yours
- Income = number of units x rent of each unit. FALSE, if the units are not occupied, they won't be counted in the appraisal
- The interest rate is very expensive, FALSE, it is only slightly higher at 3.625%-4.99%
- I can always refinance. FALSE, there are very expensive prepayment penalties if you pay off the loan early
Commercial Space
Loans for commercial spaces come in many shapes and sizes. The most common cases are: office, medical, warehouse, and retail. Commercial loans can be divided into two categories - owner occupied and leased. If you are not planning to run your own business in the space but are simply leasing out to other businesses, it is considered a leased property. In this case the loan calculations are very similar to apartment loans (based off rental income after operating expenses). If you are leasing to your own business, then it is considered owner occupied and you get benefits such as more favorable interest rates and government loans. Commercial loans typically take 60-90 days to close, 2-3x longer than a regular loan, because of all the additional inspections that have to be done based on the type of business (e.g. environmental inspections, food safety inspection... etc etc).
Common beliefs:
- The interest rate is higher. TRUE, rates tend to be 1-3% higher than residential rates
- I can always refinance. FALSE, there are very expensive prepayment penalties if you pay off the loan early