Real Estate Financing
July 11, 2013
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Observations on Real Estate Financing
Here are some current observations on financing in today’s real estate market. Since the economy is up and inventory is down, the prices are up in several markets.
I have noticed from information that I have gathered from students in the Creative Real Estate Financing class and from mentoring students, as well as from banks that we have talked to while mentoring, that the financing terms for real estate are finally loosening up. Depending on the markets that you are in, here are some observations on financing for Owner and non-Owner occupied single family homes.
- The owner occupied LTV was 80%, now it is up to 90 and 95% in some cases.
- Banks are taking a 90% 1st and a 5% 2nd.
- We have not seen 2nds since 2007.
- FHA is still at 96.5% LTV, however, now they allowing the co-borrow to come in on the loan if you have a poor credit score or debt coverage ratio.
- Debt coverage ratio on Owner occupied was 30-45%. Now it is up to 50% ratio.
- For investment property on SFD, non-owner occupied max loans were 4. Now some places will allow 10 loans or higher. This will allow you to buy more investment properties.
Jumbo loans were $417,000. In some places, it is as high as $728,000. Up until recently, jumbo loans required 20% down or higher. Some lenders are offering 10% down and offering 5% interest only. Again, we have not seen these types of loans since 2006. This is a great time to be purchasing Single Family properties, with interest rates at 60 year lows and property appreciation increasing. This is also an excellent time for a great ROI on properties. Talk to several lenders, credit unions, and banks to see what kind of financing you can get for your project.
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