Securing a mortgage or any other type of financing today, can be a stressful and challenging task. This is especially true if your income, credit or debt/income ratio is not on par with what lenders require. They are much more particular from their experiences during the Pandemic as well as the debacle of the mortgage market implosion in 2008.
I remember back then that if you had a pulse and were breathing the easy lending, no bar, anything you wanted environment provided you easy access to the money tree.
Unfortunately, this allowed so many to borrow way beyond their means. The blame is truly spread among the government, without legislating in advance, any checks and balances or safety net, the mortgage industry, who were very happy to provide “liar loans” to those individuals and couples.
False and erroneous, and inaccurate verbal information was provided to the banks, and the banks not even questioning the validity of; without any proof or documentation of income or even credit in some situations. This was predicated on your mortgage person whether he used slight of hand, devious unregulated, but at the time, legal methods or was a straight shooting professional who utilized the system in a proper and professional manner to secure your mortage.
However, deep down inside, those intelligent, but stupid, borderline borrowers surely knew that they couldn’t afford the home, condo or coop to the extent of the money that they took, but did anyway.
More important, were those that were taken advantage of, and were mostly ignorant of the process about the normally required and documented income, credit and debt/income qualifications. Experiencing these situations through stories form other brokers, associate brokers and salespeople as well as those who got stuck and lost their homes or just left; was first hand proof that provided me the necessary information that many were coerced and talked into accepting money, and not worry about it.
The borrower’s believed and accepted that it was okay. They probably told themselves, deciding the hell with it, let’s go for it and accept the money, take our chances and hopefully our income will increase in the future and enable us to afford the purchase.
The one fact that mortgage brokers forgot about, was that if the borrower didn’t make on time payments within 6 months, defaults, or is declared Lis Pens (lender files a lawsuit involving a claim on a property that has been filed) and then foreclosure, the mortage person, has to give back their commission to the lender.
Other situations that might arise would be where a mortgage broker would face “recapture” and would be invoiced by the lender and would have to reimburse the lender their commission, if the borrower defaults, re-finances their loan within 6 months of the original mortgage or
borrower lists their home to sell. After 6 months the mortgage broker’s commission is safe.
There are creative ways to be able to obtain a mortgage. Searching out sellers who do not need the proceeds from their sale. They may already have another residence to live in, have the money to purchase another home outright, and most important, would rather defer their capital gains but providing a first purchase money mortgage to the buyer for either a five- or 10-year term.
The seller should strategize having the least amount of income or no income during that time period as capital gains are 0-20%. Reducing their income in those years decreases the capital gains.
Another way is to rent your home out for 2 years and 1 day and then it becomes an investment and not longer is your primary residence. It can be used as a 1031 Defered Tax Exchange. You would have 6 months to find another investment property within the continental U.S. A third party or their attorney, would have to hold the proceeds from the sale for their primary home.
The seller would not be able to utilize the money until another investment property is found. Lastly, one must keep precise and accurate
records to show proof of the rental income in order to qualify or in the event of an audit
It’s currently a challenging extremely low inventory market. But where there is a will, there will always be a way to succeed in obtaining financing.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck NY 11021-2415.
For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com or search for property in Nassau, Suffolk, Queens, NYC and its 5 boroughs:
https://WWW.Li-RealEstate.Com
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