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Niche products are loans that are important, but they are not your every day vanila home loan. They fit unusual situations and needs of borrowers. For example Live Work Studios, Lots or Acerage (with or without a house), and Commerical Loans for a business or profession are just some of the special situations a real estate buyer might like to finance. Perhaps you don't know the difference between a trailer and a manufactued home. Or why one would could be financed with a conventional loan, and the other can not. Do know why an interest only mortgage, with a baloon payment could be helpful?
Jumbo Loans are
loans that exceed the the conforming loan limits of $453,100
in non-high cost counties and iup to $679,650 in high cost counties.
Although Jumbo Loans are more than the limits set by Fannie Mae
and Freddie Mac, they can still conform to guidelines. However,
the amount of the loan risk is toally dependent on the lender
and their willingness to loan on a given prperty. Since these
are usually held by the lender and not sold as "portfolio"
loans or sold to priviate investors. They can set the guildelines
they feel are within their particular comfort level. Loans can
be above the conforming limits and can be as high as the lender
is a wishes to loan $1,000,000, $2,000,000 , $4,000,000 and more.
The lender sets FICO, LTV Limits, down payment requirements and
mortgage insurance requirenents or not.
Mixed Use Loans
Mixed Use Properties -- are those that have both residential and commerical/non-residential uses in the same building. Most lenders will not loan on projects that exceed 49% commerical non-residential space and 51% residential living area. These loans are usually done with FHA 203b home loans with case numbers after 9/14/2015, according to HUD's 4000.1 Handbook, which governs FHA Home Loans. The previous regulation only allowed 25% commerical space. This new rule requires that "The non-residential pace may not impact the residential character or marketability of the property. This regulation will more than likely be determined by FHA appraisers, the lender/FHA underwriter and disputes will probably take place and will have to be resolved by HUD and the Department of Justice ultimately. However, a 203b, like all FHA home loans, must be made by FHA approved lenders or a commerical lender. This type of property is consider non-conforming.
Otherwise the guildelines are the same as for FHA loans and the guildelines specifically regarding FHA 203b loans, including loan amounts. if the project has more than 49% non-residential area determined by the total square footage of the building, or the loan is a "Jumbo" the loan would have to go to a commerical lender. Often if the project is new ,and the developer has financing in place. You take advantage of and they will often throw-in carpeting or appliance upgrades if go with their lender. However make sure you can move in as soon as it closes. Otherwise you could have to wait for the up to 75% of the units hve been sold before you can close. If it is a non FHA loan, the down payment could be higher and the interest rate would be much higher than equivalentt FHA 203b home loan.
Vacant Lots and Acerage
If the lot you wsh to buy is in a development are with utilites in place and the steets and side walks in, sewers and water service are at the front of the property. This city/town/ or new development lot will be easier to find a lender, than if it lacked those improvements. A property on a dirt or gravel drive way without any utilities, sewer or water (not even a well has been dug) and on 15 acres, could be much harder to find a lender.
Lenders don't usually like to provide purchase money loans for lots or acerage without a house. Even homes on more than 5 acers can be a problem for a convention home lender. You can explore the USDA loans, which are designed for low and moderate income properties. But acerage can be in the hundred or thousands of dollars and even million's dollars. These larger parcels are covered in Farms & Acerage.
Let say you found a 2 acre lot and want to build a home in few years, when you retire in 6 years and want to start the building 5 years expecting the construction process to take a year. That presents another problem. there are lenders who will step in and give you both the lot and construction loan. That is if you can show you expect to start construction on the home within a given period let's say 6 months or complete the project in a year or eightenn months. These loan programs require that you have put the package together with plans, contactor and estimates for your new house. The lender review them and if approved they will provide both the money for land and the construction costs and then convert it to a 30 year fully amortized mortgage at time the new house is granted a occupancy permit.
Farms & Acerage
This type loan are not usually made conventional lenders the maximum for acerage for with house on it typically conventional home mortgage tops off at 5 to 25 acers, depending on the lender guideline even a USDA loan has the 25 acre limit. However, specialized Agricultural business lenders and even large banks have make loas to buy a farm, ranch or vineyard or recreationa land. VA and USDA also make loans in rural communities. I have discussed USDA as a separate area and I won't repeat that here click here or on USDA above. However, VA is a niche within the the VA home loan area and will discuss that with some specifics here.
VA farm and ranch loans- there is no limit on the number of acres, but the property must appraise similarly with like properties in the area as and can not be signifantly different as to the type land, buildings, as recently sold properties int he area. The property must have a house to be used as the primary residence. The appraisal can not include crops, livestock or farm equipment. The vetran is required to have Certificate of Eligilbity available online from the VA or you can get by mail by providing VA form 26-1880 and request the COE. The sales contract for the property must include make it clear that the contract will be void if you fail to qualify for the VA loan.
Manufactured Homes are also known as single and dobuble wide manufactored homes and trailers are also manufactured homes. What makes the different in being able to get a conventional loan is whether it has a permenant foundation or not. If it has a foundation it is a manufactured home and get a conventional loan. If does not have a foundation then it is a trailer and can not get a conventional loan and must get a commerical home loan similar to a car loan. Is a prefabricated home a manufactured loan? Generally a prefabreicated building has all the parts cut in a factory and shipped to site and it is constructed on site, log homes would falll into this category as well. The manufactured home are totally pre-built, in a factory and assembled with counters and cabinets, carpeting and the entire completed roofed home is shippped on a truck to site. Placed on the foundation with a crane. If it is only set on wheels it is a aingle wide trailer. Even double wide can be "temporarily" put into a "trailer park" and sometime in future moved to a new location. You can not get a standard conventional home loan without the foundation.
Not all conventional lenders will make a loan on manufactured home even on a foundation. It depends on the lender. FHA and VA will make loans on manufactured homes as long , again, they set on a foundation.
Section 184 Indian Home Loan Guarantee Program
This home mortgage was especially created, in 1992 by Congress, for American Indian and Alaska native families, Alaska villages, tribes of tribally designated housing entities to facilitate homeownership and increase access home loans for Native American Communites. These home loans fall within the HUD's Office of Native Programs, under the office of Loan Guarantee under Section 184 home mortgages made to Native American borrowers. Like VA loan this loan is a guaranatee, to assure the lender's investment will be repaid in full in case of foreclosure.
As with FHA and VA loans the Section 184 loans are made through particapating lenders and work with the tribe and the Bureau of Indian Affairs if leasing tribal land. The lender evaluates the borrower's documentation and then submits the loan to HUDs Office of Loan Guarantee. This loan is limited to single family homes (1-4 units) and fixed-rate loans for 30 years or less. Loan limit varies by county like other HUD, and this program are not eligibile for commerical buildings and can have an adjustable rate mortgage. This product is not handled by conventional mortgage lenders. As I understand it because the land is leased by the Inan tribe. I would speak with your tribal council for a list of lenders. These are speciality mortgages and generally not done by the normal retail or wholesale mortgage lender. The reason is the land is not normally included and is either leased or is owned by the tribe. Unfortunately, I regret, I do not have a lender who will do these home loans. If you are interest this type of mortgage, please contact your tribal council to learn more!
Interst only loans requires you to pay only the interest on the loan and not pay anything toward principal for a set period of time, determined by the lender and then pay both interest and principal for remaining term of the loan. Interst only loans are normally use to qualify for a larger mortgage than you might not otherwise afford. Let's say the borrower takes out a 30 year full term loan with the interest only first 10 years and then principal and remaining interest is then amortized over the next 20 years.
What some clients think:
"My wife and I strongly endorse and recommend Jaren Dahlstrom, for your real estate needs. Five years ago, he helped us in acquiring our house, and two years latter assited us in lowering our mortgage payment. He is an expert, honest, trustworthy, and meticulous in securing purchase and refinance home mortgages and it will benefit anyone looking for home financing to use him."
Alberto and Eugenia L., San Pablo, CA
"We've worked with Jaren since 2003, and he has belped us and our family members get through the mortgage process many times.
He is very well versed in the mortgage process, and is very patient. He is by far the best broker we've have ever worked with, and always has his customers well being at the forefront of all that he does. To this day anytime, I have a mortgage question I ask Jaren.
I had him help my parents, and my children in financing their properties as well. Anytime any of my friends took to financing I send them to Jaren. Hands down I do not think there is a better mortgage broker than Jaren Dahlstrom."
Gregory H., Lathrop, CA
"Jaren has helped me with a home purchase loan and 2 refinances. I would certainly rely on him again should I need another home loan. He dedicated himself to finding the best loan for me, and went the extra mile to make it work. I know he will do the same for you!"
Christina H. Kelseyville, CA
Let's see how that works. Let say our borower wants a $200,000 mortgage and $50,000 yearly income and with $1,225.00 in credit card and car loans, and the mortgage would be at 3.875% (4.047% APR) fixed interest rate, $940.47 is the payment for mortgage principal and interest and $289.00 in property tax and hazard insurance. The lender is requiring DTI ratio to be at or below 45% (debt-to-income ratio). Can he get the loan with this scenario? Please Note: interest rates change daily and your rate will be different*.
Home. Mortgage Payment ............................940.47*
Taxes and Insurance.....................................289.00
Total monthly commitment.........................$2,454.47
Monthly Income $50K divide by 12 = $4,377.82 the bottom ratio is 51% or much to high, and the borrower does not qualify . 30 year term, fixed interest rate.
What happens if do it as a interest only for first 10 years the interst only payment drops to $645.83 per month
Interest Only payment.......................................645.83 for 1st ten years* (3.875%, 4.047% APR interest only based on 30 year fixed interest rate*) in order to qualify for the home loan
Taxes and Insurance........................................289.00
Total monthly commitment............................$1,932.83
The Debt-to-Income ratio is now 44% and the borrower woruld qualify, because DTI is below 45%
At the end of the 10 year interest period the loan payment would climb from $645.83, the payment nearly double at a wopping $1,198.83 for the next 20 years. Of course the borrower could refinance into a 30 year fixed fully amortized mortgage, in a few years when the borrower paid down his debt or increased is monthly income. That is one scenario for an interest only home loan. An alternative could also be an adjustable rate mortgage if the rate was low enough to offset DTI in the same way. However, if you can not refinance in those 10 years your payment will climb.
*This example is for educational purposes only, and is neither an offer to lend or solication to borrow.
Commercial Real Estate
These properties require a commerical loan and generally require a higher down payment and interest rate. Also, some borrowers ask that the seller to take back a portion of sale price as 1st mortgage for whatever period can be negotiated between the buyer and seller. In this case there is not a third party lender. Land Contract can also be used to purchase commericial real estate.
Doctor and Medical Practices
There are commerical lenders that will lend money on existing practice, new offices and expanding a practice. Therse are done by specialized commerical lenders and if you have an interest in this type of loan give me a call and I discuss your needs with you.
Hard Money Loans
Hard Money is a term that came about, because lending companies that make this type of loan are "hard" for anyone else to make, because of the risk involved. These lenders will usually charge a much higher interest rate and will also require a higher investment/equity from the borrower. The reason of course is the high probability of risk they are assuming with this type of loan. These loans are obviously not regulated by Fannie Mae or Freddie Mac. They are however, subject to the lending regulations that govern the residential and commerical lending industry. The lender are usually not interested in income and assets of the borrower they are more interested in actual real estate and the deal that is being funded. These lenders are very good at making sure there is a lot equity in the project. If you want to "walk-away from deal" you will think twice, because of amount cash you will loose, and if the borrower does "walk", the lender can foreclose and make a good profit on the eventual sale of property. These lenders understand the risks, they are willing to make a profit from , because of those risks. The funding for these loans normally come from there "investors" who are looking to get a much bigger financial return by taking "calculated risks" on relatively short term loans of anywhere from a few months to 3 years to 5 years.
Basically, the borrowers who use "Hard Money Lenders" are people who are also doing real estate deals that also carry more risk or can't otherwise qualify for a loan. For example: Mr. Flipper uses Hard Money to make a deal work. He is buying a trashed home and wants to fix-it and then flip it in a matter of weeks to say 6 months, and the high cost of interest is just a cost of doing business. Mr. Flipper buys a badly trashed fixer house with $80,000 cash, but he needs to spend another estimated $75,000 in repairs and closing costs, before he can sell the home. He has only $50,000 in additional cash for repairs, so this flipper is $25,000 short. However, the existing market value of property is what he paid for the home a total of $80K cash (no loan). But the market value for home once fixed the home could sell for $250,000 or a gross profit of $95,000. He expects to have all the work done in 6 months. He takes out a hard money loan for the additional $25,000 he needs to complete the repairs at a 10.5% annual interest rate, with a just 32% loan-to-value the lender very happy, real estate loan, with a baloon payment is due 12 months. A longer term just encase it takes longer than Mr. Fipper thinks it will. need. The borrower makes interest only payments for the six months, and must then pay the baloon payment of $25,000 in cash at the end of term or when the repaired propety is sold and closed. The project was completed in 5 months and house was sold for the estimate of $250K. It closed within the 6 months, as expected. What did it cost Mr. Flipper? The interest payment on this loan would be approximately $218.75 x 6 months = $1,312.50 + the baloon's principal of $25,000 or a total $26,312.50 principal and interest. The net profit would be $68,687.50 after paying the $25,000 hard money loan & interest. ($95,000 - $26,312.75 = $68,687.50). This gives you an idea why "Hard Money" lenders can operate. Mr. Flipper walks away with close to $65,690, got all his money back (the down payment and the $50,000 of his money for the repair sand paid the loan full a 53% return in 6 months. Did it make sense to use hard money? I think so!
What type of loans will these "Hard Money" lenders make and how they work:
Residential and Commerical
1.Leverage - 70% to 75%
2. Pricing 50%-55% Loan-to-Value (our exmple above was just 32%)
Creative Financing Solutions
1. Non-warrentable Condos -- not approved by FHA for loans
2. Direct Lenders with Cross Collateralization Options -- can purchase one property and use equity in another as well
3.. Cash-Out Refinance for Investment and Business Purposes
4. Individuals, Trusts, LLCs, and Self\-Directed IRAs.
5. Interest Only, Partial Amortyization or Full Amortization
No Prepayment Penalities & No Minimum Interest
A Bridge Loan is usually used in conjunction with construction loans. Once you have gotten a construction and the home is now complete you will need to payoff the construction and carry you over until you can have a long term home mortgage traditional 30 years of less. But you may have costs you need cover including landscaping, furitiure appliances, taxes and even over runs that the construction loan did not cover.. A bridge loan bridges, between the two loans between the construction and the long term financing. The Bridge Loan is typicall a short term loan ( 2 weels to 3 years) , which allows the breathing room to arrange for long term financing for the home. These loans are usually made by hard money lenders.
That are non-warrantable are a often a problem for FHA and Fannie Mae lenders. However, there many conventional lenders who can do non-warrantable first mortgage. Please know they are not Conforming or Qualifed Mortgages
If your under water on your home mortgage this government program can help! Learn more under Loan Products. Just Click Here to lean more!
Check-out these Niche Products that just one of my lenders offers! You probably thought these programs were gone forever. If you need one of these you now know who to call!
Are You Looking For Non-traditional Home Loans?
This list shows the variety of loan options available and is not an offer to lend or solisitation to borrower. It is meant for educational purposes only. Please note that down payment, interest rates and APR very depending program, lender & lender guidelines, and borrower's credit history. Rates, programs, down payment are all subject to change without notice.
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The Difference Betweeen Quit Claim And Warrenty Deeds
A Quitclaim Deed is means to transfer property between related or unrelated people and/or a trust quickly and inexpensively. This is ofteen used to transfer property between a husban and wife during a divorce. To a child older or between siblings. This type of transfer is done when the property is not actually sold. It also does not gurantee the property being transferred is actually owned by grantor, or has the right to actually transfer the property. It is also possible a long forgotten lien holder to still have a claim on the property. A quit claim deed is available from the County Recorder or Online. A small fee charged by county recorder the property is located. This can done by mail or in person at the County Recosrder's Office. The ownership is not transferred until it is recorded by the county. A title or escrow company is not required for type of transaction.
A Warrenty Deed does gurantee the gantor is the actual owner and has a right to sell the property. The property is owned free and clear of leans. A title search has been completed by a Title Company and a title insurance policy has beeen issured to gurantee title of the property to the new owner and their lender. It also means that the buyer is proteced from someone with a better claim to the title. If the title search was in error the buyer is entitled to compensation. The title insuranace backs up the claim of the warrenty deed. This protects the lender and/or the buyer from future disputes or liens that did not appear in the title search, at the time of the buyer's purchase.
What Is The Difference Between a Warrenty Deed And A Trust Deed?
As mentioned above the Warrenty Deed transfer the ownership from seller to the buyer of your property. A Trust Deed (also known as a trustee deed and deed of trust) is used in States like California, which allows nonjudical foreclosure, a foreclosure without having to go to court. It used instead of an ordinary mortgage deed that documents the transaction between two parties the buyer and the lender. A Trust Deed allows the lender to notify the third party trustee that the mortgage holder has failed to make the required payments and after following the legal requirements forecloses on the property and authorizes the sale of the property at public auction. If the property is not sold for at least the amount owed on the mortgage plus at least $1.00 the property will revert to the lender as a foreclosure, which they can sell as a REO property.
How Old Do You Need To Be, To Own Proprety?
You need to be 18 years old in order to own property in your own right. However, a 16 year old can purchase property with signature of a parent or guardian. The minor can claim property as their own, but you don't actually own it until your 18 years old. One needs to be at least 18 years old in order to enter into a contract.
What is a Land Contract?
A Land Contract allows property buyerrs an opportunity to obtain land and/or building without having to qualify for a mortgage. It is an agreement between the buyer and the seller directly wiithout a third party lender in the middle. Once an agreement is set it drafted into the Land Contracted and the buyer takes ownership of property and pays the seller a payment for set period of time just like any other mortgage payment. Once the property is paid in full the deed is transferred to the buyer .
One of the major advantages is that the buyer does not need good credit. The decision to sell to the buyer is totally up to seller, just like if is with an "all cash" transaction. The seller decides if he/she requires a deposit or down payment, based on whether the seller feels un-easy about the buyers credit or not at the time they enter into the contract.. Down payment or deposit could be quite low. Of course the buyer could make a request to the seller to regularly report the payment history to one or more reporting agencies in order for the buyer to build credit. The advantage or disadvantage is the payment history is not required to be reported to a credit reporting agency. Many individuals with little or no credit history would like to use the land contract to establish credit.
The transaction could be completed in as little as one day and you usually don't have to pay closing costs, and those savings could be applied directly to the principal. The buyer would be wise, however to have a title search done prior to signing the contract to insure that the seller actually owns the property he is selling. I would suggest that the buyer have the contract negotiated and/or at least reviewed by the buyer's attorney to protect buyer as well as the seller. With a title search you will know about any liens or if the seller is still paying a mortgage on the property. For example a buyer would really be in a world of hurt, if after making a down payment and two or three years of monthly payment.s, only to learn from the seller's mortgage holder, that he stopped making payment several months ago. Now the Mortgage Company is foreclosing on the property and the seller has disappeared with months of payments. Leaving you in the learch! With no recourse, no property and no way to recover your your investment. You need to know, a land contract allows: if the buyer gets behind in his/her payments, even one payment, the seller can evict the buyer without legall recourse or protection. A mortgage would have provided protections. However, some states do have legal protection after the buyer has made a particular number of payments on a land contract. You should consult an attoney before your enter into a land contract. You need to know your rights and understand completely the provisions of the agreement. Including principal and interest payment allocation, late and other fees and grace periods for late payments and recourse if a late or missed payment occurs. A mortgagee, as opposed to a contract holder, has an extensive legal rights through the foreclosure process, which is not normally provided by a land contract. A land contract is a great option, as long a you go into the transaction with you eyes open, fully understanding the provisions and terms of the contract. This is often used to buy and sell raw land or rual property, commercial properties and homes thet would not qualify for a mortgage or where mortgage lenders are reluctant to provide a mortgage for various reasons. In many parts of the country land contracts have a history of having been used to exploite the less educated and poorer segment of our population causing a great deal of heart ache and economic damage. Be fore warned.
|Copyright 2016,2017 Jaren Dahlstrom, All Rights Reserved -- Jaren Dahlstrom, Loan Officer, CA BRE 01358563, NMLS 237999 -- United Lendinging Partners/United Realty Partners BRE #02012818, NMLS #1525816|