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As lending guidelines continue to become more stringent, real estate investors are facing new challenges everyday. It’s now more important than ever to have a professional mortgage consultant that has an in depth understanding of lender guidelines and specializes in financing for investment properties.

Below are six important things every real estate investor should be aware of.

1. Loan to Value Changes

Some lenders have recently reduced their maximum loan to value guidelines. Very Few Mortgage Companys can still offer up to 90% financing for stated income investors, however as market conditions continue to deteriorate; this could soon become a thing of the past. With today’s favorable interest rates, we recommend not waiting any longer to take advantage of these programs.

2. Title Seasoning

There are two main issues when it comes to title seasoning. The first involves refinancing an existing property to appraised value. Most lenders require 12 months on title in order to refinance a property based on current appraised value, however, there are still some products available for non-seasoned refinances. Secondly, the length of time the seller has been on title needs to be taken into consideration when purchasing a new property. Lenders will typically require that the seller has been recorded on title for at least 90 days; however, no seasoning is still available on a limited basis.

3. Declining Markets

Foreclosures are one of the driving forces behind most declining markets. There is no standard industry definition of what constitutes a declining market, and is within the lender’s discretion to determine if the appraisal accurately reflects the current market value. If the lender determines the property is located in a declining market they may reduce the maximum loan to valve.

4. Appraisal Comparables

Many lenders are now requiring up to two closed sales within three months and one closed sale within six months. They may also require comparable pending sales validating the market is stable.

5. Stated Income

Lenders are becoming increasingly cautious regarding stated income borrowers. Many lenders want to see three to four times the monthly stated income in reserves. Although these are unwritten guidelines and typically only six months PITI is required, it is the underwriter’s discretion. This is especially relevant when stating income as a full time real estate investor.

6. Holding Title in the Name of an LLC or Corporation

Although there are benefits to holding title in the name of an LLC or corporation, few lenders will allow it. Recently, some lenders are requiring the property being held in the individuals name for a minimum of 90 days before it can be refinanced. This is something to be aware of if purchasing property in a company name with the intent of refinancing it immediately. You should always consult with a qualified attorney or CPA regarding holding real estate in an LLC or corporation.

By Rein Mortgage Co.

This entry was posted on Thursday, February 21st, 2008 at 5:03 pm and is filed under Commercial Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.