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 Siers Phone: 252-489-3861 Dated: February 25th 2015 Views: 3,446 About Mike: Mike is a top producer in the Nations top Privately owned Real Estate company, Howard Hanna. With a...
About Outer Banks Real Estate Mike and Stacy Siers Howard Hanna
We could give you the scripted bio, but it is the age of Google. Believe me when I say if you are online, you can be found. I want to tell you what you may not know.
Stacy and I have been together for most of our lives. We enjoy being around each other so much we work together. I like to say she keeps me balanced. I have been fortunate to work for many people and companies throughout the Mid Atlantic region and feel that experience has helped me understand people and situations. I have been doing sales for about 20 years, construction during 10 of those years and have managed a few companies along the way. Stacy, operated a HVAC company, managed retail and restaurants. Stacy started in Real Estate in 2008, not the best time if you dare to remember the real estate crash. She motivated me to get my license in 2009 and I started in 2010. I looked at the bad real estate market as an opportunity. A time to learn the market from the bottom up. A time to learn how to sell real estate when no one could buy it. In one of my past jobs, I learned the who, what, whens and hows of sales. I could move products! When I bought my first house out of college, I learned this was one of the most important purchases I would ever make. So when we work with clients, it is about them. We want to know why you are looking, how you want to use the house or what you are selling. What memories you have made from this house. We believe real estate is about people and relationships. We are fortunate to build friendships through real estate. It usually means we go to a lot of dinners in the summer when folks are down. (I really love that part)
The wrap up, Stacy and I won't sell you a house on The Outer Banks of North Carolina. We will work with you, share our knowledge, provide facts and dig for information on every home you are interested in and hopefully grab a bite to eat and share the memories you are making!
"August 9, 2014.....
We would like to extend our appreciation for the extraordinary work in assisting us in buying our home on the Outer Banks. Having you on our side made the process flow smoothly. Your expertise, local connections and communication skills were excellent. Any questions we presented to you were answered and solved immediately. We could always count on you making calls on your cell phone or tapping on your lap top. For instance, time was getting close to the closing date and we had problems getting flood insurance and within 20 minutes you made some calls and we finally had flood insurance. The type of speed and service that you provided enabled us to breathe easier.
Thank you for your service. We could not have found a better realtor.
Tony Sapienze and Penny Eby