Posted by David Krulac on March 08, 2001 at 16:39:53:
even if you qualified you could not get a non-portfolio loan, one sold to FNMA, FHMA, etc, on the secondary market. Most mortgage companies sold 100% of their loans so they could only lend non-portfolio.
Banks and S&L by their own policy sometimes kept some mortgages in their own “portfolio” as investments without selling on the secondary market. These loans of course carried higher than market terms and interest rates.
Thankfully that is changed today and if you qualify you can get a new residential mortgage, no matter how many mortgages you have.
My Banker told me I can only get 4 mortgages and then I’m at my limit…
Truth - Most banks sell 95% of their residential mortgages on the secondary market to instituions like Fannie Mae or Freddie Mac. Those institutions will only allow 4 mortgages to one person at that bank.
Well, all of us who are real estate investors, obviously have many more than 4 mortgages… Once you get to 4 you have to graduate from the Consumer Loan Division at Happy Bank, to the Commercial Division.
You will want to ask for the VP in charge of Commercial Loans. You will interview him to find out what type of loans their bank likes to do.
You will explain your real estate investment plan and see if they match with the bank’s. If so, you will now graduate to get what are called Portfolio Loan money, or Shelved Loan Money.
This is actually money that the bank does lend (of it’s own deposits) and earns the points and interest.
Most of the time these will be 3 year callable, or renogotiable rate loans.
Very common, don’t be afraid of them…Standard…
Look for another tip from Russ Whitney either later today (if I’m not too wore out from the nasty’s) or tomorrow.
the FNMA rules has been changed… - Posted by David Krulac
Posted by David Krulac on March 07, 2001 at 21:13:17:
it was a stupid rule to begin with. Someone with 5 mortgages for $10,000 each was ineligible but a person with 3 mortgages for $100,000 was ok.
Anyway the rule was recinded.
Russ, I have run into that experience. My mortgage broker just went to another company who will except 8 mortgages. I primarly have to use equity LOC’s for down payments (I have 3) and I have alot of firsts as well. I have to go this way due to a hot market. There are no “don’t wanters” because there are too many “wanters” but that’s ok. Anyway, don’t the commercial loans have higher down payment requirements meaning a lower LTV? That will use too much of my LOC. What are the underwritting guidlines as compared to the conventional market? Are jumbo’s involved? Also I am trying to do a blanket refi on 2 properties. Is that a shelf loan as well? I was told by my broker that it was. Thanks for your response.
But its still a Personal Loan - Posted by Frank Chin
Posted by Frank Chin on March 08, 2001 at 06:20:59:
Even without the 5 mortgage rule - I still encounter mortgage qualifiaction problems for conventional mortgages in the New York City area.
1- With high Real Estate prices - 5 mortgages at 200K each can easily run to One Million total. Banks look at these as personal loans.
2- On the income side, many banks take 75% of Rent Roll as income. In the HOT NYC rental market, where vancancies are non existant, the 75% rule is unrealistic.
3- After knocking 25% off the rent roll, they want total payments at 28% of total income. Some banks use 40%. Even so, there’s only so many mortgages you can get this way conventionally.
4- Credit scores go down as more and more personal loans are added.
Of course, you can try no-doc loans. But its difficult to have positive caah flow in NYC with 10% interest rates. After analyzing this problem, I find that its probably more realistic to go for commercial properties at a slightly higher loan rate of 8-1/2%.
Many banks I approach would not do 1-5 families under their commercial loan program. Would Russ suggest I buy a suit a visit some senior VP with a business plan?