What Is The Bottom Line Facts On Seasoning
I have spoken to 3 different mortgage brokers, all of whom are recommended by out REI club about rehabing and seasoning issues and I have gotten 3 different answers.
If I purchase a property, fix it up and then offer it for sale what are the facts as to seasoning.
I have been told :
- seasoning is not a issue for a retail buyer with FHA loans or any other types of loans, only for refinancing it myself. I would have to wait 12 months before I could refinance it.
- I need to own the property for at least (take your pick, I have been told 3 months, 6 months and 1 year) before it will qualify for an FHA buyer.
- I need to own the property for 3 months and document every receipt and justify the extra price I am asking in order for it to qualify for an FHA buyer.
- Finally, I've been told that seasoning isn't just an FHA issue, everyone else in the mortgage industry is either in the process of having to deal with seasoning issues or soon will be, and 12 months will be it across the board.
Can anyone please tell me the facts?
[ Edited by TRISHLEWIS on Date 12/30/2003 ]
It all depends on the lender's policy. Some have title seasoning and some do not. Some require 6mo, some require 12 mo. It is NOT just for FHA and also applies to refi's as well (again depending on the lender).
I asked a lender if I refinanced a property that I had owned for only 3mo, what their policy was. They told me that they would refi me but they would use the purchase price to base my LTV (not the apprasial, which should normally be the case) until I have owned it for 12mo. This seemed screwy to me.
Personally, I stick with lenders that do not have title seasoning.
Ok - I'll clear the air a little on this issue.
Regarding the FHA factor I have no solid answer. I do know that not all lenders have the seasoning issue. One such lender is www.jlmdirect.com they will refinance or do purchase money mortgages on properties that can prove their value with real good comparables. Contact them, they operate in almost all the continental states. They are a residential lender only, no commercial. Their website shows what states they are licensed in.
Almost every "lender" will have different answers because of their underwriting guidelines.
I spoke to a person the other day who spoke to an account rep at www.lendingtree.com and was told that 100% NOO financing did not exist and was a sales and marketing scam. Obviously the account rep was a baboon and had no real origination experience in dealing with investors. It does exist and there are a handful of lenders that do it. If you want to find a lender contact your local mortgage broker and have them find one for you. If they can not then keep calling around. Mortgage brokers are just like realtors, there are million of them and only 5% of them deal with investors and are any good at it.
I am located in Illinois and know my lenders for my area very well. Alot of the 100% lenders have changed their guidelines in the past month and have added alot of conditions on acquiring such financing.
Phil
See my profile for contact information
I have heard different things from different lenders myself. I think half the battle is knowing what questions to ask. When you considering adding a lender to your repertoire or just finding A lender, just ask "what are your seasoning requirements?" After I learned to ask this simple question, I was better able to direct my focus to the lender that was the best fit for my situation.
[addsig]
I don't have any answers, but I'm glad you asked those questions because I'm in the same boat with you and the reply's helped me. I hope they help you as well. I'm going to meet with 2 different loan officers tomorrow and I'll be sure to ask about the seasoning requirements.
Because I plan to flip properties as quick as possible.
Good Luck,
Have a HAPPY NEW YEAR!!!!!!!!!!!
The whole seasoning issue is specific to the lender. Some reqiure it and some don't. They can be right next door or in different states.
I had a lender to tell me they didn't loan on homes until they were complete and occupied. They suggested I go to a private lender to get the money to complete the renovations and get someone in the house. Then come to them to refinance at a lower rate with cash out because of the higher appraisal.
They told me they could lend to me even if I just bought the house yesterday. No issue with seasoning. I did have another situation similar. I purchased the house with private money because the lender would only loan 65% LTV or Appraisal (which ever was less), but would refi at 85% with a good rate. After the purchase, they then told be They couldn't refi for 12 mo.
The lender's guidlines / requirements are the factures in seasoning or not.
Perhaps this article will help:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=385
What success have you had with lenders who actually will do the loan with no seasoning in regard to interest rates?
It is one thing to find a lender who will acutally do the loan without regard to seasoning, but if you are paying an outrageous interest rate then they might as well not even offer the loan.
For instance I am looking at a condo now that I can buy and fix up. I would like to keep it long term and just rent it out. I would buy it with cash and use cash to fix it up, but once it is done I want to refinance it to get my money back, becasue of the instant equity I could go with a 80% loan based on the final appraisal and the numbers would work that I could get all my cash back and the property would cash flow.
This is based on geting a 30 year fixed 80% loan at 6.5%. But now with seasoning issues that loan isn't available until after holding the property for 12 months.
Has anyone got a source that would still do this type of loan at rates close to 6.5-7.5% with the seasoning issues or is this where the catch comes in?
www.jlmdirect.com should be in that rate range
Try New Century or Greenpoint
Thanks guys, I'm putting
www.greenpoint.com
www.jlmdirect.com
In my favorites and will be contacting them.
www.newcentury.com seems to be for mortgage brokers only.
I am familiar with about 750 lenders lending guidelines over 10 years. I am not soliciting business but I love to expose lenders and the hidden rules so that regular people get access.
Basically there are conforming and nonconforming lenders and then govys (fha va) and private lenders.
Like chinese checkers and american checkers and chess and monopoly they all have rules called guidelines. All residential lenders lend on 1-4 units (single family dwellings up to 4 units per property)
GENERALLY SPEAKING......
FNMA or "Fanniemae" and FHLMC "Freddie mac" are conforming lenders and have stricter rules to abide by and look for as much owner investment as possible. They must give you a loan if you meet the government developed guidelines... period.
FHA and VA - are for challenged buyers with little or no money down but in the end are often more expensive in the long run and far more complicated to obtain than most other loans.
Nonconforming lenders are also called subprime lenders or nicknamed "BCD lenders." Basically they do not conform to the above guidelines but write their own "expanded" or "liberal" guidelines. So these lenders generally work with more challenging or higher risk borrowers/loans and their rates are higher but they are more likely to grant a 100% mortgage and their niches (specialities) vary.
The big three criteria generally used to
determine the rate and term are
1 LTV (loan to value or purchase price divided by money down)
2 CREDIT scores and issues such as judgements disputed credit history
3 Debt to income ratios - ability to repay.
For investments the conforming lender will want a property's rental income to carry its own debt with upto 75% of the income while some nonconforming lenders will allow upto 95% of the rental income to cover the debt (PITI plus other expenses such as water or other utilities that can place a lien on the title or are required to rent the property out.
Debt ratios for conforming lenders are 28/36 without "expanding" the guidelines because of "compesation factors (something special the borrower has that allows the Underwriter to lower risk factors such as time on job, cash in the 401K, appreciation trend in subject property's community)"
28/36 means that 28% of your monthly income (based on a 24 month average)can be used for PITI and homeowners association and 36% of the same monthly income can be used for the PITI and homeowners association but must include other credit revolving and Installment credit.
Generally,.. without compensation factors
FHA allows 29/41 ratios
VA is about 44 or 45% overall but must include utilities (lights, gas, water, phone) + PITI +Homeowners association + revolving and installment credit.
Nonconforming lenders can go as high as 60% but generally debt ratios top out at 50% overall.
Private lenders and hard money lenders are vary greatly.
If you are looking for creative finance go to brokers not banks whose guidelines are often extreemly limited on creativity and Underwriters guidelines are risk adverse.
Wow, great information.
Would you care to answer the questions here also?
http://www.thecreativeinvestor.com/ViewTopic18836-22-0.html