Author: ipgocorp

We’ve all heard the propaganda – the economy.  What ever went wrong this year everyone blamed the economy including myself and my friends.  But does that explain why so many approved deals went sour.  I just don’t know.  I thought this was a problem that only we were having, but as I talked to more and more people in our industry the same story kept on repeating itself.  From Real Estate Brokers to Business Brokers to Lenders and to our competition the Financial/Mortgage broker.

We lost in prospective approved deals more than we made for the entire year, and I know that we were not alone in this phenomenon.  But WHY?

I blame not the economy but the talking “heads” – pundits about the economy.  They have provided many people a false sense of security that we are over this economic wave, and that only better times (which translate to better deals) are ahead.  Nothing  in my mind can be further than the truth.  We are still in this economic sea of turmoil.  Lenders are not opening up the spicket so to say and lending everyone who needs capital money yet.  There is a false sense of security as to the lending community,  so please if you have an approved loan – TAKE IT, as there may not be a loan waiting for you in the months to come with better terms.  Lenders are still being very restrictive on their lending criteria.

So if you are not the cream of the crop, and you are fortunate to get a real Letter of Commitment – then pull the trigger and go for it.  I believe in the long run you will be very pleased that you did, as long as you made a smart buying opinion.

With the end of the year comes the likelihood that the SBA Guarantee Fee will not be waived any longer.  We are all waiting for the latest information on what will occur at the end of the year.  Will we be back to 75% Loan Guarantees and full SBA Guarantee Fees or will we stay the same are now.  90% Guarantee and No SBA Fees.

2010 did see one major change,  The SBA 7A loan which was capped at 2,000,0000 (two million dollars) has been raised to 5,000,0000 (five million dollars).

Lastly be aware that now for the first time SBA Loans can be applied to Self Storage Loans as well as Mobile Home Park loans.  What that means is that a qualified buyer can now buy a self storage facility anywhere in the US for as little as 15% down or in some instance may be even as little as 10% down.

With the cost of real estate still plummeting this is a great way to get an increased ROI or IRR by purchasing a cash flowing property with 10%  to 15%  down you are almost guaranteed a positive cash flow from day one.  At the least it is a GREAT DEAL.

NEW YORK, NY – Mortgage rates increased modestly this week, with the benchmark 30-year fixed mortgage rate ticking up to 3.75 percent, according to Bankrate.com’s weekly national survey. The 30-year fixed mortgage has an average of 0.19 discount and origination points.

The larger jumbo 30-year fixed stepped lower to 3.67 percent, and the average 15-year fixed mortgage nosed up to the 3 percent mark. Adjustable mortgage rates were higher as well, albeit modestly, with the 5-year ARM increasing to 3.13 percent while the 7-year ARM crept higher to 3.37 percent.   

Mortgage rates reversed last week’s move, posting the first increase since mid-March. But the movement was pretty tame as not much changed in the previous week – we saw more mixed news on the economy against the backdrop of economic weakness and accommodative central banks overseas. Still, mortgage rates are at levels that prior to this month would have been the lowest since 2013, so nobody’s mortgage refinancing is in jeopardy and nobody is being priced out of the market based on mortgage rates.  With the Federal Open Market Committee meeting next week, don’t expect big mortgage rate moves beforehand as markets await the Fed’s thoughts on interest rates and the economy.

At the current average 30-year fixed mortgage rate of 3.75 percent, the monthly payment for a $200,000 loan is $926.23. 

SURVEY RESULTS

30-year fixed: 3.75% — up from 3.72% last week (avg. points: 0.19)

15-year fixed: 3.00% — up from 2.99% last week (avg. points: 0.16)

5/1 ARM: 3.13% — up from 3.11% last week (avg. points: 0.20)

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in 10 top markets.

For a full analysis of this week’s move in mortgage rates, go to www.bankrate.com

The survey is complemented by Bankrate’s weekly Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next seven days. The majority of panelists – 69 percent – predict that mortgage rates will remain more or less unchanged in the coming week. The remaining 31 percent of participants expect further increases in mortgage rates. Interestingly, none of this week’s respondents forecast a decline in mortgage rates over the next seven days.  

Learn How to Calculate True Down Payments for Loan Approval, While Understanding What Loan to Value Really Means

 

The words “Down Payment” conjure up a lot of images, as well as lots of misconceptions.

100% financing – no down payment, pay latter terms, etc, sounds like an infomercial for a furniture salesroom.

Bank loans to real borrowers could not be anything further from what those infomercial advertisements would have you believe.

First of all let me state categorically there is no 100% financing for any bank loan in the market place. Even the lenders that profess that they have 100% financing do not. As a borrower you will have to put down money to buy a property whether it’s a business or a piece of commercial real estate.

“I have to have a down payment but how much?”

Well that is a very interesting question and one that cannot be answered specifically but rather generally. Each lender will have their requirement for a down payment. For example an SBA lender, using the SBA504 Program, will only require 10%, while a commercial investment piece of property depending on the CAP Rate may require at least 35%, or anywhere between the two. Land financing if you can locate a straight land lender will usually require 50% down.

Let’s look at the above example of 50% down; we will use 50% for ease of mathematical formula. Assume a property is selling for $300,000.00, no interest carry, no points, fees etc. The loan is for 50% of 300,000 or $150,000, as the borrower brings to the table $150,000 or 50% Down.

But the above scenario is not realistic. What lender is going to do a loan with no points no fees etc? Also if development is involved there will be interest carry for the loan, so the project cost is no longer $300,000.00 but maybe $350,000.00 so a 50% Down would now be half of $350,000.00, not $300,000.00. Some lenders may split the difference by not charging the points directly and putting them in the loan, while in the loan they may not be subject to 50% for the down payment.

Read GET Your Loan Closed! to find those important questions to ask your lender, and to view actual loan sizing models.

Loan to value is the amount of money of your down payment as compared to the loan amount borrowed. Notice it is not compared to the purchase price but as compared to the loan amount. For example 25,000 down against a $100,000 loan will yield a 75% Loan To value.

The only thing you should be aware of is that a lender who states they will loan at 75% loan to value, may not actually lend at 75% because if the property does not cash flow at the appropriate debt service ratio, the lender will not lend the value they stated but will reduce their loan to value to meet cash flow requirements. So in essence you have to look at all the factors of the loan, cash flow as well as debt service to determine what the actual loan to value will be that the lender is comfortable with. For a complete example of how this works please refer to our book GET Your Loan Closed From the clients perspective this is probably the most misunderstood area of commercial financing.

It is vital to understand how all these factors interrelate and that they cannot be taken individually but must rather be looked at collectively.

Next week we wrap up the FREE White reports with Putting it all Together in the Loan Package. Make sure you order the Book GET Your Loan Closed to get in depth knowledge of all ten of these reports at only $62.00 for the hard cover or $37.00 for the pdf version.  Order Now! GET Your Loan Closed