Feb 25 2015 Matthew Byrne Article One Financing Insights
Feb 25 2015 Matthew Byrne Article One Financing Insights
Disclaimer! : The tone of this article is in NO way meant to scare anyone, with good credit, regardless of current financial standing from being an investor in the Real Estate Market. That is to say, if you do have good credit and have a solid source of regularly recurring income – you can and should be able to qualify for a home loan - that is within your means.
The saying goes, ‘play to your strengths!’
As a former banker for twenty-five years, naturally I was hoping that my strength in transitioning to Real Estate would be the financing arena. I so wish that were the case…
Unfortunately there are two things that are working against me. First, my most recent experience is in Commercial Lending, so there is a decided lean to my understanding of financing within the marketplace in that direction. Second and more importantly to the majority of investors/readers in our market – interested in residential properties – there just are no real magical answers to the ‘current’ state of the residential secondary market.
For starters, the industry itself has ratcheted down the programs to levels that, quite frankly should have been in place all along. Imagine, having to actually qualify for what you are buying – over the long haul, thirty years with all the economic and market fluctuations that that entails. The next hurdle is then the appraisal process. The market is still in recovery, prices of properties that are selling are still influencing the pricing of properties on the market – without regard for the duress of the sale. My training in appraising real property, admittedly limited, has always been that there need be some adjustment of or limitation to reliance on sales of that nature, but the truth is that these are the properties that are selling.
The Good News is, with all that said – I think I can make the entire process significantly easier for you with just a few helpful suggestions! These suggestions are not prioritized in any special manner, but they all will save valuable time and stress in the lending application/decision process and in my opinion – increase your probability of success in acquiring financing. So in no particular order…
Prepare and Maintain a Personal Financial Statement – If you have not got or are not ready to put together a personal statement, then it might just be my humble opinion, but you just might not be ready to buy Real Estate. So many people are afraid of putting together, what simply amounts to a reconciliation of your life. My belief is that people are more afraid know if their life WILL reconcile… Hint: If it doesn’t, then again – you might not be ready to make an investment in Real Estate.
By reconcile, I do not mean that A Personal Financial Statement has to yield that you have a certain Net Worth to indicate that you are ready, rather it will (if done honestly) give you the opportunity to make certain that you have the accountability to make certain that your personal inventory is in the order that it takes to make this crucial financial decision.
Does the Statement match your current life/financial situation? If there is more leverage than equity – is there a PLAN in place to service that debt. Has there been a stream of Regular, Recurring and Reliable income set in place to service that debt, and the global financial undertaking of home ownership/investment?
Have copies of vital information ready to provide to the lender:
ALL of Them! If you have a Schedule ‘E’ Listing within your return of other Business Entities that you may be involved in, PROVIDE those full returns as well. This simply removes the need for the Banker to ask for them later or worse, overlook the benefits that you (and your accountant) put them in place to provide benefit to you in the future…the future just arrived!
The good Banker will utilize ALL of this information to provide the very truest picture of your Regular, Recurring and Reliable Income to utilize in the underwriting process.
I can’t tell you what a bad Banker does or doesn’t do, but I have met and helped many of their former customers!
Again, the more information that you are prepared to provide to the Lender the better.
If you are paperless, you have two options: A) get to know the website and how to download and print out your statements or B) get to know the Personal Banker or Customer Service Rep at your Bank and let them know that you are very likely going to need their assistance when it comes time to submit application(s) so that you have fresh statements to accompany the request!
If you are old fashioned, then be old fashioned. Be organized and keep/maintain your statements in a Three (3) Ring Binder. Bring the Binder to the Lender and blow their mind! They will make the copies they need…
Verification of Significant Assets / Documentation of Liabilities
When preparing your Personal Statement, if there are significant Assets that you’ve listed, provide the most recent statement for those Assets: Quarterly Stock Portfolio Statements, IRA Statements, printouts of Auto Values from the Internet, etc.
Likewise, be ready to provide the most recent statement or printout from the website of any Mortgage and Auto Loan(s) that you may have, Credit Card Statements and other liabilities that are listed on your Personal Statement.
Extraordinary Activities / Keep Good Records
If you have extraordinary financial activity in your account(s) – by all means be prepared to explain them. There are too many examples to try and illustrate but a one might be: If you’ve recently sold an automobile. Keep records of the transaction. The likelihood that you might have to explain a Deposit of $5,500 at some point in the application process, at the exact wrong time in the process is incalculable, but it WILL happen. If you have the documentation ready to submit along with the Bank Statement, then again, you’ve done the Banker’s job for him/her again (sensing a pattern here?) which is also immeasurable.
In general, be organized and do all that you can to anticipate things that might raise a question (which always equates to a concern to a Banker) so that you have the answer ready before it even has to be asked. Again this not only speeds up the process, but it builds such credibility (character being one of the Five (5) Key Characteristics of Lending (cough, future article) with the Lender that it lubricates the decision process!
Caution to the ‘Shysters’ (as my Grandma used to call them) that may be reading… If your stuff is too slick when you bring it, or you have SO many entities that even you and your accountant cannot explain what they do or why they exist properly – the good banker can and will see through the BS before rendering any final letters of Commitment.
I am not saying the deals do not go bad, bad things happen to good people, but if the deal is skewed from the outset, it is screwed from the outset.
You know who you are! If you have them, then again, be prepared to provide the documentation [Partnership Agreements, Articles of Incorporation, etc. that might be necessary to help you make the case that you may try to make to exclude or properly offset those obligations.
I am hopeful that this you will find this information beneficial. The long and short of it is… you really need to have your financial house in order, to be prepared properly to approach a Lender about requesting their assistance to help provide the money required to purchase the home you desire to hold order over!
Thanks for spending a little time with my thoughts…
Matthew J. Byrne
Waterfront Properties OBX
Author:Mike Nolan Phone: 252-207-4898 Dated: February 25th 2015 Views: 3,428 About Mike: Mike is the Broker-in-Charge of Waterfront Properties OBX and has been successfully involved in real...
Waterfront Properties OBX is a privately owned company specializing in sales, leasing and land development of residential and commercial real estate on the Outer Banks of North Carolina (OBX).
Michael P. Nolan, Broker-in-Charge, has been successfully involved in real estate on the OBX since 1989. Mike was involved in the initial and / or development of the following premier communities and businesses located on OBX: Pirates Cove, Corolla Light, The Currituck Club, Pine Island, Old Nags Head Place, The Berkley Manor, Beachside Landing, Ocean Trail Realty and Ocracoke Island Realty to name a few.
Mike was the first resident of Pirates Cove community in 1988. He toured Rees Jones, famed golf course architect, the first time Rees saw the property now known as The Currituck Club on Feb. 18, 1995. Mike managed the sales and marketing while Rees Jones, Inc designed and developed The Currituck Club golf course from a combination of dense woods and sand dunes into one of the top 50 new resort golf courses in North America by Golf Digest magazine in 1997. Mike also developed Old Nags Head Place, a community of homes located within Nags Head with an architectural design reminiscent of the original Nags Head landscape, with cedar siding, exposed rafters and preservation of the indigenous live oakes within the community
From Corolla to Ocracoke Island, Mike's expertise in all facets of real estate sales, development, leasing and investment are available for buyers, sellers and investors to explore the many opportunities the OBX has to offer
"We've now used Mike Nolan at OBX Waterfront Properties for two purchases in the Outer Banks. Our first purchase was an income property in Avon, NC and from the first phone call Mike was easy to talk to and very friendly. He listened to what we were looking for in the property and explained how everything would work and what we should expect. It was clear from the start that he was also professional and very knowledgable about realty on the Outer Banks. The purchase of that property went so smooth and easy with Mike Nolan's lead that when it came time to buy a full time home in Nags Head a few months later, we didn't even think twice about looking for another realtor. Mike was going to be our guy! I can honestly say that it wouldn't have been possible to even make the move to the place we've always dreamed of living without the support of Mike Nolan and OBX Waterfront Properties. Saying that he went above and beyond the call of duty isn't even coming close to the amount of work and dedication he puts into each and every sale. Buying both properties from 500 miles away wasn't easy, but Mike was always easy to reach and always stayed on top of every appointment, every inspection, and every other aspect of buying both properties. He's one of the few people that I've met in my life that will truly put the client before everything else and words can't express how grateful we are that we found him to help us move on to the next chapter in our lives. Mike, thank you so much for making our dreams a reality!
- Mike and Christina Burns "