NEED A MORTGAGE?
Non-conventional programs are available
Everybody is familiar with the normal and much advertised residential loan programs like Conventional loans, Jumbos, FHA, VA, Reverse Mortgages, and Home Equity lines, but there are many more programs available that might provide a better solution for the buyer. Here are some of the other options that are widely available, but not well known, because they are more often available through a mortgage broker and not offered by conventional banks or lending institutions.
Renovation loans: With a renovation loan, money is set aside for repairs and placed in escrow at the time of closing, allowing everything to be completed in a single transaction. Rehab mortgages allow buyers to borrow based on what the house is expected to be worth after the renovations are completed. Homeowners can also use rehab mortgages to refinance their existing mortgage plus the renovation costs into one loan.
Self-employed loans: These are loans for self-employed borrowers who have good cash-flow in their business, but have a lot of deductions so their income tax return doesn’t allow them to qualify for a regular conventional or FHA loan. These loans only look at the deposits in either their business or personal bank account to show proof that they have the ability to pay the mortgage.
Investor loans: There has been a proliferation in these types of loans in the last several years that are earmarked specifically to investors. They range from stated income loans to debt service coverage loans, to no ratio loans, to bank statement loans, etc. Experienced investors who buy and sell (fix and flip) can get a loan for up to 90% of the purchase price including the renovation amount without proving the ability to pay the mortgage. Lenders are targeting these investors because they usually have good credit and cash in the bank.
Construction loans: These loans provide funds to purchase a lot (if not owned already) and pay the developer/builder the cost for the construction of the home. The builder/developer gets paid in draws, that are based on the provided work schedule and the time it takes to complete the work. The interest rates are generally low and you pay interest only on the portion that has been paid to the developer/builder. At the end of the construction, a final loan would need to be acquired in order to pay off the construction loan.
Construction to permanent loans: These are the same as construction loans, but you get a final loan at the same time that you get approved for the construction loan. The main benefit is that you don’t have to worry about interest rates going up while the property is under construction.
Brian Tewes is a licensed mortgage broker and president of Tewes Mortgage and offers free consultations.