The Mortgage Go To Guy!!

Right now one of the most popular requests that I am hearing is that someone wants to buy a bank owned or short sale property.  These two property types are very similar in that they both entail negotiating with the bank for the ultimate purchase price.

The other similarity is that in both instances you are asking the bank to take a loss on their asset - their asset is the mortgage on the property you want to purchase.  This is not always as easy as some of the Real Estate Experts might say… but if you have your ducks in a row, then it can be accomplished in a way that can save you a good bit of money on the property you want to purchase.

The most vital step in the process that is often pushed until later-on in the process is making sure that the finances are in place.

This can mean any number of things… but we can narrow them down with one simple question:

Do you have enough cash to close on the property without financing and without hurting your financial well-being?

If you answer is no… and for most people it is, then you need to pull back the reins and start at square one… get with your favorite mortgage broker, like me!

Your Mortgage Broker will help you understand the process involved in financing a short sale property.  He will also help you understand the costs…

As most people prefer to purchase these properties with little or no money out of pocket, the Mortgage Broker needs to be able to show you that there is a loan program available for your scenario regarding property type, purchase price, as well as the standard credit, income and asset questions always present in a mortgage process.

Many people purchase these properties using Hard Equity / Hard Money Loans.  These are loans which are typically given by investors rather than banks.  They have higher interest rates and are usually meant for quick turnarounds.  Three reasons to use Hard Money Loans on a short sale are:

• The bank may be more flexible on the purchase price if you can close in 7-10 days.  It would be hard to get a conventional loan that quickly.
• A Hard Equity Lender may provide 100% of the purchase price and renovation costs, while a conventional lender may see the property as more risky since it may need work to bring it up to standard market conditions.
• Hard Equity Loans can be refinanced in 3-6 months (or longer) to a better rate at which time you may be able to reclaim any renovation costs that you have paid out of pocket.

This does not mean that conventional financing is out of the question.  If you want a conventional mortgage loan to purchase your short sale, there is one thing that is key… Pre-Approval.

If your goal is to purchase in a short sale, you need to have all your loan documents for credit, income and assets ready and at your mortgage broker’s office prior to placing an offer. 

Let the mortgage broker submit your application to a lender to get you preapproved so the only steps necessary in completing the loan process are getting the appraisal and any necessary inspections.   Most lenders can close within 10-14 days on the long side if you have already been pre-approved.

Also, being pre-approved will make your contract “stronger”.  The bank will understand that you are ready, willing AND able to carry out the purchase.

Right now there are some amazing deals out there… foreclosures on properties with lots of equity.  Getting your team together before you start trying to find the property is important… but getting your Mortgage plan in place is key.

For more information on Short Sales and Mortgages, please follow this link to contact me today!

More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
TheMortgageGoToGuy.com
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida