Home Financing Guidelines For Simultaneous Closings – 4 Things You Should Know

Home financing using simultaneous closings, has gone through some major changes. For example, with few exceptions, table funding or simultaneous closings just don’t happen right now.

It should not be surprising when you think about it. After what has happened to the housing market we knew there would be changes in the financing. When the sub-prime mortgage problems extended to the financial and credit markets there could be no doubt that major qualification changes were in store.

Briefly, simultaneous closings are two real estate closings that are scheduled in very close proximity to each other. One is conducted with the property seller and their investor/buyer. The other is conducted with the property buyer and their investor/seller. While the closings may not actually be conducted simultaneously, they are so close to one another the term is appropriate. The normal interval between simultaneous closings is a few hours to a few days.

The idea is for funds from the property buyer to be used by an investor to purchase the property from a property seller. When done correctly an investor could actually purchase property without having cash of his or her own in the deal. Two closings scheduled within one hour of each other could actually work funding miracles when correctly done.

Now, home financing guidelines have changed dramatically. In fact right now banks are not lending and borrowers are not borrowing. Even the promissory note buyers have changed their underwriting guidelines. There are four qualifications these investors look for. They look for equity, note seasoning, credit score, and performance.

Equity

Equity is also known as “skin in the game”. You can forget about little or no money down by the borrower in the current financial marketplace. It is the absence of protective equity by borrowers that has contributed in large part to the financial crisis our country, and the world is involved in today.

When equity is involved, the more you have the better off you are. Conventional lenders only want borrowers with 20% or more equity in their home financing deals today. Even good credit borrowers are expected to put 20% or more into their mortgage transactions.

By contrast, promissory note investors are more flexible, but borrowers must have at least 10% in down payment funds and a strong credit profile to qualify. Here is more detail about the four home financing qualifications note buyers are looking for.

Note Seasoning

Note seasoning refers to a promissory note that has a payment history. The amount of acceptable seasoning will vary from one buyer to another. The accepted period may be as short as three months or as long as one year. The seasoning requirement makes it virtually impossible to conduct simultaneous closings today.

Credit

While credit scores may disqualify a buyer instantly with a conventional lender, a score of at least 620 will generally work with seller financed promissory notes. One of several benefits of owner financing is the flexibility to work with a buyer regardless of their credit score if they put enough equity into the deal.

Performance

The fourth home financing criteria expected by lenders today is a performance record. You have heard the saying, “It’s not what you say but what you do that matters.” Another major benefit of seller financing is an opportunity to do what you say you will do.

In essence your destiny is in your hands. All you have to do is make your payments on time, take good care of the property, and fulfill your obligations. When you decide the time is right, you can refinance the property for better rates and pull some equity out of the property as well.

Even though simultaneous closings are not currently available for home financing in many markets, you can still take advantage of the opportunities available with seller financing.

The four qualifications discussed above answer the needs of the current mortgage markets. Remember, every transaction is unique.

In conclusion, do what you must when times are unstable, adjust, adapt, and improvise.

Copyright © 2008 | TDO Properties, LLC | All Rights Reserved

Home Finance – 3 Reasons To Do It Yourself

Home finance just isn’t what it used to be. If you have been following my articles, you know I’ve been preparing you for the situation that is developing in the housing market. In this article I will share with you three reasons why it may be advantageous for you to finance your own home sale.

First, most mortgage lenders are reeling from the effects of the historic levels of real estate foreclosures. Even though a national real estate market doesn’t actually exist, indications are it may have just been virtually created. This is actually more a result of wide spread business practices that are being modified and adjusted because of the problems they have caused.

Generally speaking, the home finance problems have been created by overzealous mortgage lenders that allowed home buyers to make purchases that were not likely to ever succeed. What initially began as a concern for the sub prime mortgage market has now made it’s presence known throughout the industry, including the highest levels.

This reality has caused the mortgage lenders to re-group, reconsider, and revise their previous underwriting guidelines and requirements. As you might expect, the so called pendulum has swung to the other extreme. That would be the extreme of caution and the associated paralysis of analysis.

Even though they are still in the lending business, many mortgage lenders are reluctant to make loans. It doesn’t matter whether you are dealing with a prime or sub prime lender, the thrill is gone because of so many bad loans to recover from. I guess we can call this phenomenon some kind of post traumatic disorder. The reality is, it is taking longer to process mortgage loans and there are more hoops to jump through.

The second reason you might want to consider financing the sale of your home is the tremendous amount of housing inventory in the marketplace. Some estimates suggest it will take at more than nine months to liquidate the existing inventory.

That depends on how well all of the elements fit together so houses can actually be sold.

One of the major elements is the amount of time it takes for sellers to realize that the sale prices are trending downward. Typically that trend will continue until the market determines the actual value of each property. Since most home sellers resist the idea that their property has actually lost value, it is difficult to say just how long this phase will last.

Some experts have reported more than a trillion dollars in specialty mortgages are set to adjust over the next two years. Unless dramatic actions are taken we are likely to see some huge additions to the foreclosures already in existence.

Additions of this magnitude will certainly drive the housing prices down further and faster.

Neither of the two reasons described is an issue you can control. As a matter of fact, right now no one appears to be in control.

The fact no one is in control of this housing fiasco is the third reason you may like the idea of seller financing your property. When you don’t have to worry about the source of home finance funds, one of your biggest worries is over. Seller financing actually puts you in control of the funding. With you in charge of the funding there is no need for you or your buyer to wait for lender approval. You become the bank.

Now, this is important. Since you are going to provide the financing for your home sale, you want to be very certain your loan will be repaid. You don’t want to be guilty of the same kind of misguided underwriting that has caused so much grief in the financial industry. That means you must focus on your buyer and his or her total package.

The total package includes considerations like the amount of the down payment, the credit score and profile, the ability to pay you, and their character. It would also be really great if there is an active savings account in place.

Here’s one more thing about seller financing you may like. You will attract more buyers than with any other type of financing. In the midst of everything that’s going on in the real estate marketplace, as a home seller you need to stand out and be recognized as the resourceful, creative, financially astute, problem solver you are!

Here’s one more thing. Did you know that you can provide “seller financing” for your buyer’s home loan and get all your cash at closing? It’s true. You can.

What do you think? When it comes to home finance are these three really good reasons to do it yourself?

Tips for Getting Home Financing

There are many home finance solutions for people who want to buy a home. With all the various options for financing and loans, it is possible to get the house you’ve always dreamed of owning. The recent financial crisis has taught us to be a little more careful with our finances, which is why it is important for us to study our options thoroughly and carefully and make sure that we are in a position that enables us to pay for our housing loans and other expenses that come with buying a home. It is important that we don’t jump the gun to make sure that we won’t have any home finance problems in the future that may lead to a lot of debt and foreclosure.

The first step in buying a home is getting a loan. This is where home finance can get tricky. Just because you are able to meet the lender’s screening criteria, it doesn’t mean you’re automatically qualified for the loan. Banks and other lenders tend to award loans to people to show that they have the ability to repay the loan and that they are not overloaded with other debts and expenses to pay for. This is why we must create a balance sheet and compare our income with the expenses we incur every month. The information we can get from this is beneficial not only to the lenders, but to loan applicants as well because it shows us if we can handle the financial burden or if it will bury us deeper in debt.

If you think your credit scores and income statements can get you the loan you need, you can now start applying for financing. A lot of people look for a house before meeting with a lender’s loan officer and end up getting disappointed when they don’t get approved or they are offered an amount smaller than what they need to buy the house they chose. One way to avoid disappointment is to get a pre-approved loan. Before house hunting, meet with a loan officer and apply for pre-approval. If the lender believes you are qualified for the loan, you are given a letter of pre-approval which gives you an idea of how much you will be getting from the loan and you can now start looking for a house that you can afford.

Buying a new house is a decision we shouldn’t take lightly. It requires a lot of financial planning to make sure that you get your dream house without drowning in home finance debts.