Investment Mortgage Guy

The recent credit crunch has made financing investment property more challenging than ever before. Here is some history and suggestions to help you navigate through your mortgage options in today’s restrictive market.

For years, there was a variety of different mortgage products available to finance your investment properties. Fannie Mae and Freddie Mac, Portfolio Lenders, Alt A lenders and Sub-Prime loans flooded the market offering the real estate investor a myriad of choices for financing their investment property.

As mortgage default rates increased starting in late 2006, Wall Street investors who put their money into mortgage backed securities started to leave the market. By August of 2007, The only national financing remaining (though mortgage backed securities) was Fannie Mae and Freddie Mac. In September, the Government took control of Fannie Mae and Freddie Mac and will inject up to 200 billion to make sure they stay solvent though these turbulent times.

 Here is some history of Fannie Mae and Feddie Mac:

In 1997 and before, there was no limit on the number of properties you could have financed.

In 1998 Fannie Mae changed the limit to 10 financed properties with them and 10 properties with Freddie Mac. Mortgage loans outside of Fannie Mae and Freddie Mac such as portfolio mortgages or local banks did not affect your limits.

In 2003, the limit changed to a total of ten financed properties and finally in October of 2008, the limit was decreased to four financed properties including your primary residence.

With these huge restrictions upon the number of properties an investor can have financed, a person may wonder what to do.

Here are the best options I have found:

1) The are a few national portfolio lenders left who will still finance an investor with more than 4 financed properties. The rates are about 1% to 2% higher than Fannie Mae. They will require 25% down and a 740 credit score.

2) Local Banks do not care about the number of properties you have financed. They will require at least 25% down and typically have a 5 year balloon with a 20 year minimum amortization schedule. Local Banks are going to be very tough on proving income right now. Proving cash flow is going to be critical if you want to qualify.

3) If you are just looking for short-term financing, hard money lenders will always work. You will be typically looking at a rate of at least 12% and a minimum of 3 points. (Very Expensive)

How long will financing be this restrictive? It’s hard to say but most likely for a good year or two. For advice on your situation, feel free to contact me at 952-808-2820.

Rob Bonahoom

Mortgage Coach

If you have ever been interested in the great opportunities in North Minneapolis, let us drive you around. This is a rare bus tour where we will drive you around the areas, show you both rehabbed houses and for sale properties. The tour will leave at noon on Saturday, December 6, from nearby Robbinsdale and will take approximately 2-3 hours. We handle parking, finding the properties, and logistics. You simply sit back and listen and see how so many investors are taking advantage of these great deals. Because of limited seating, a reservation is required. Contact us now!

Register for the tour by calling Rachel Knaak at 952-808-0042.

This is a FREE all day workshop designed for the new and seasoned investor. This event will feature a full panel of experts in the area of financing, tax, law, 1031 exchanges, financial planning, rental management, insurance and much much more. You will leave this day will real tools to integrate into your investment plan as well as some excellent profesional contacts for your rolodex. Six hours of real estate continuing education have also been applied for.

Featured speakers will be as follows:
Rob Bonahoom Mortgage Coach
Greg Nelson CPA
Jeff Peterson 1031 Specialist
Matt Engel - Attorney
Adam Hartung - Certified Financial Planner
Brent Mohlenhoff - Insurance
Nina Haugen - Rental Management
Bruce Zimmerman - Rent Collection
Peter Fanucci - Credit Lines

This event will be held at the Bloomington Center for the Arts Building at 1800 Old Shakopee Road.
To register contact Rachel Knaak at 952-808-0042 or rknaak@houseloan.com

Do you own several rental properties but sometimes wonder what the real financial benefit of real estate investing is going to be? Are you thinking about investing for the first time but unsure of the right game plan? The Financial Freedom seminar is designed for the individual who is interested in zeroing in on a clear goal with their rental properties and the fastest way to real financial freedom. This is truly one of the most important seminars of your real estate investment career.

To register contact Rob Bonahoom @ 952-808-2820 or rbonahoom@houseloan.com

Maybe you don’t own any investment property, but have heard about the tax benefits of owning investment real estate. Otherwise, maybe you own a property or two, but don’t feel like you are getting all the tax shelters that you can. Our CPA, Greg Nelson, will be explaining how to organize your business and yourself to maximize your tax deductions easily and quickly. He will talk about how to take advantage of the tax shelter even if you “make too much money” to claim much or any depreciation. Come see how to write more off and put more money each year in your pocket.

This seminar is geared for both the newer investor or the investor that feels like they need some help in different areas, and much more! This will be a workshop format to allow you time to get your questions answered in a group setting.

Register for the seminar by filling out this quick seminar registration form or call 952-808-2820 for more information.

Investment Guru Scott Ficek hits the nail on the head with this great article on screening tenants. Read these common sense tips that most landlords overlook

http://www.minnesotainvestmentrealestate.com/tenants/calling-all-landlords/

Indymac Bank has been working hard to keep homeowners in their homes If your mortgage is about to adjust and your with Indymac Bank, you may qualify for a loan modification that could lower your interest rate to 3% Here are some factors that will help you qualify:
1) You need to be at least 60 days late on your mortgage
2) You need to prove you make enough income to afford the payments yet not make so much they can’t justify lowering your rate
3) You will qualify easier if your interest rate is currently adjustable

I think we will see many mortgage companies following suit like this in the near future

Rob Bonahoom
Mortgage Coach
952-808-2820
Rbonahoom@houseloan com

What does Fannie Mae, Freddie Mac, Lehman Brothers and AIG have in common?

They are all suffering huge unforseen losses from mortgages that are going delinquent. Add a major housing slump, a hint of recession and a dash of credit crunch and you have a recipe for disaster in the mortgage world. For years, borrowers who fell behind on mortgages and bills tapped their good friend Mr Equity to bail them out of trouble. Their homes were turned into ATM machines and coverd up some real fundamenal issues for many Americans and their spending and saving habits.

But the little guy isn’t the only one to blame. Mortgage Brokers bloomed on every street corner helping the average guy tap his Equity Tree, assuring him that the lower payments will definately save him from his troubles.

But then of course we had the wholesale lenders who encouraged the broker to be extremely agressive in originating loans. They created loans products that made no common sense but since everyone was doing it, it seemed ok.

And don’t leave out Wall Street, who rated these bonds very high since they had a low default rate for many years. They cut too many corners on underwiting the true risk of these loans, lining thier pockets with the profits.

So back to my question, how will the bankruptcy of Lehman brothers affect your mortgage? If you have a mortgage now and never get another one. You will be fine. It shouldn’t affect you very much. If you will need another mortgage down the road, don’t get freaked, but be prepard to demonstrate your ability to repay. The loans of the future will require complete background checks and a solid credit rating. Provable income and asset reserves will also be required. You can also expect them to be tough on your collateral. But hey - what do you expect when this mess is going to cost billions and billions to America.

Written by

Rob Bonahoom
Mortgage Coach
952-808-2820
rbonahoom@houseloan.com

Have you always thought about buying investment properties?  Attend this FREE one and a half hour seminar. There is no charge at all, no contracts you sign with us, no consultation fees, no hidden agenda. This seminar is an excellent opportunity for you to learn more about our process and meet a team of investment real estate professionals that can guide through the finding, financing, buying, renting and owning your first investment property.

Register for the seminar by filling out this quick seminar registration form or call 952-808-2820 for more information.

For the first time in history, most lenders are taking requests very seroiusly by their borrowers to have their loans modified. A loan modification is where the bank adjusts your rate and terms to something more favorable for you without having to do the tradional refinance.There are several factors that have caused banks to take a hard look at this. First, the average foreclosure costs about $58,000 for the bank to execute. If the bank has to do a loan modification that costs them $25,000 long-term and they rebuild loyalty with that customer, it’s just makes sense for the bank to look at it. Secondlly a lending instituition recieves a black mark on the books and has to keep a certain amount of reserves available for every foreclosure they have. This is a huge incentive to limit the number of foreclosures they keep in their porfolio. Finally the government and politcal opinion has shifted dramatically to helping people stay in their homes. An organization called Hope Now (1-888-995-4673 or WWW.HOPENOW.com) was formed to education people to contact their lender to re-negotiate terms that are affordable to them.

I have been a mortgage banker for 13 years and until 2 months ago, I have never seen banks willing to do this. In fact, a wholesale company that I brokered 28 loans though 2 years ago recently contacted me and asked me to call all my past clients and wants modify all 28 loans from the option arm product they have right now. They are worried that down the road the borrowers may not be able to pay.

So loan modifications are happening, who qualifies and how do you get it done effectively with your lender?

The first step is to contact your lender and request to speak with the loan modificatin department. Explain to them your reason for needing your loan modified.
All banks will require you to do the following:
1) Fill out a financial statement.
2) Provide your most recent tax return and W2
3) Provide a current pay stub
4) Provide a most recent asset statement.

Follow up step - Call them once per week until you hear something back. The squeaky wheel gets the grease. I recently had a client get both his option arms modified to a 5% rate - 5 year interest only loan. It took 3 months of diligence and phone calls, but it happened. He is thrilled!

Tip on Qualifiying- Every bank is going to have a slightly different qualification policy but in general to qualifiy for a loan moficiation, you want to show the bank you are able to make your payments but not have so much extra cashflow each month that they know you will never default. It’s a little bit of a cat and mouse game but lenders have come a long way to streamline the process.

There is hope out there is your feeling a pinch with your current mortgage terms. So intead of worrying about it every night, roll up your sleeves and get busy!

If this task just seems too daunting and you don’t want to take it on yourself, you can hire me to do it for you. I charge $1500 only upon successful modification.  THERE IS NO UP FRONT COST.

You can call me at 952-808-2820 or rbonahoom@houseloan.com