Lending Status

The following is a message from the President of Long Realty, Rosey Koberlein that she sent October 17, 2008. Long Mortgage only does residential loans. If you're seeking financing for commercial projects, give me a call. I regularly work with several lenders who have consistently worked hard for my clients, and nearly always come through with a solution. And for the cases where a commercial buyer wants a FAST closing, or simply cannot qualify for conventional financing, Owner Carryback financing can open the door.

From Rosey:

With all of the confusion that is going on in the economic world, and the way the media is spinning the story, you would think that money is not available to even buy a home!!! I think it is important for you to hear some truth before you do your open houses this week-end. I asked Long Mortgage to tell their story from this week’s activity---Here you go---

There have been a lot of questions as to whether or not mortgage companies are still lending money. Long Mortgage is lending money and will continue to lend money to our borrowers as we always have. We see the press talking about a “Credit Freeze” or “Credit Crunch” this in no way means that mortgage lending has come to a halt. This simply means that guidelines have tightened to avoid the higher risk loans that have caused much of our economic trouble. Long Mortgage and its partner Wells Fargo have always practiced responsible lending and as a result is now one of the strongest, most resilient banks in the world.

Please don’t make the assumption that there may not be money or loan programs available for your client. Long Mortgage is still providing all types of loans.

Thought you might enjoy hearing some stories of Loan which have been made in the last week.

Tony Poe of the River Campbell Branch recently closed Jumbo $600,000 cash out refinance. Long Mortgage has access to Wells Fargo’s Private Mortgage Banking that specializes in Jumbo loans and “High End Products”.

Cleve Smith of the Tanque Verde Branch recently closed a 90% LTV interest only conventional loan in 5 days. This loan was turned down by another lender and the borrower was told it couldn’t be done.

Brian York and Heike Shockley or our Sierra Vista Branch approved and closed a client on an FHA loan that was turned down by another lender after being in process for 2 months! Using a local assistance program the borrowers got into the home for less than $1,000 out of pocket.

Bond money is available to combine with FHA financing that can provide up to %100 LTV.(borrowers will be required to pay closing costs) Bond money is limited and on a first come first serve basis, when it’s gone it’s gone. You will need to speak with a Mortgage Consultant to see if your borrower qualifies for this assistance.

Commercial Lending Status

Many of my clients have recently asked me if commercial lending is frozen. They've heard this from friends and even lenders. This is simply not true in a general sense. People with relatively low credit scores (less than 700) may have difficulty qualifying for affordable financing and can expect to pay more for loans (higher interest rate, larger down payment, etc.) but loans are still available.

A popular loan program (SBA 7A) allowing for just 10% down with interest rates of 6-8%, but requiring 51% or more owner occupying of the space, is more challenging to qualify for, requiring good credit scores and documented evidence of debt service capability (e.g. income to new debt ratio of 1.3 or greater). This helps the underwriter have confidence that your business's net income will pay the loan payments and then some. If a buyer doesn't qualify for an SBA loan, then a conventional loan program is the next alternative to explore. These typically require 25-30% down payment and have higher interest rates of 7-9%.

If a conventional loan is not possible due to finances or credit score, then owner carryback should be explored next. These private loans can be structured however the Seller and Buyer agree. Low down payments are possible as are low interest rates. Typically though the loan will be for a rather short period of time like 5 years, when a balloon payment for the principal balance is due. During that period, it is important for the new owner to save $, clean up credit issues, and seek alternative financing sources. In some cases, the previous owner lienholder may renew or extend the loan if terms (like interest rate) are still favorable in the marketplace.

If your business operates in a sole proprietorship structure, then your business's net income will flow into your personal finances and may become muddied. Lenders typically prefer an LLC structure to keep the business finances separate from your personal. Seek legal or tax council for advice on which is best for you. Also it's good to speak to a lender prior to seeking financing so that you can transition to the ideal structure and have time to generate financial records that are so vital to obtaining loans.

So it's just not true to generalize lending as "frozen". If you are considering purchasing real estate in or around Tucson AZ, contact me and I'll help you determine a reasonable price to offer, and get you plugged in to some excellent commercial lenders to get you pre-qualified for financing. Then we can develop an accurate offer to bid for the property. It continues to be a sound wealth-building strategy to own real estate, operate your business in part of it, and find good tenants to lease the un-used portion to help you pay your note.

Bert Ratia

Long Realty Commercial

BertR.LongRealty.com

(520) 301-0155