A Look to The Future Rates & Trending Loans

Johnny Sharp

By Johnny Sharp

Here we are, almost at the half way point of the year. The third quarter is coming up soon. Where are you with your real estate business plan? As you already know the summer is our hottest season and so I hope you are prepared to make the best of it. Following is some information which may help you exceed you goals.

Will Interest Rates Increase in the Near Future?
No one can actually predict rate increases, but it looks like the Feds will be increasing rates in the coming months. If I could make predictions, I would probably live in Las Vegas or in New York near Wall Street. Since, that is not the case, we must follow trends and listen to Federal Reserve policymakers. The economy, jobs and the stock market have been improving and Fed Chairwomen Janet L. Yellen is saying she will “gradually and cautiously” most likely in the coming months increase rates. Well, we in the mortgage industry have been hearing this for a while, but this July it could actually happen.

Bank Statement Loans Are BACK!
Well, let’s ask a few questions. Are bank statement loans for everyone? Will they get funded? And how will they help and or hurt the current state of lending?

1. Twelve to 24-month bank statement loans are not for everyone. You must be self-employed and own 100% of your business. The minimum FICO score allowed will be determined by the lender whether you need 12 or 24 months of your bank statements. The lender will be looking at the average to formulate your monthly income. For example, after reviewing their tax returns the perspective borrower is coming in at $5,000 monthly (heavy write offs) but, when examining their monthly bank statements, the borrower is making an average monthly deposit of around $20,000. The lender will be using the $20,000 as a monthly income for the loan; essentially, putting your client in an entirely different income bracket.

2. Yes, these loans are being funded by many lenders and have worked well for those business owners, who may not have been able to move forward with any other type of loans.

3. The easing of credit has been coming about for months now and this type of loan only helps our economy improve.

Renovation Loans Are On the Up Swing.
Renovation loans have been popular for decades, but have increased in interest with one of the new products (HomeStyle) which recently came on the market. These products are for purchase and rate and term refinances. SFR, PUDS, condos, one to four units primary homes (FHA), investments and second homes (HomeStlye is available for all). All improvements must be permanently affixed and add value to the property as determined by appraisal. Here are some of most used renovation loans in the lending industry today:

FHA 203K – Is limited to $35,000 advance for repairs and can be added back into the loan. HUD consultants are not needed for this loan.
FHA Full – Allows the borrower access to a much larger amount for repairs and will require a HUD consultant. After repair value (ARV) will be assessed on completion.
HomeStyle – Is a Fannie Mae loan and therefore follows all Fannie Mae guidelines. Yes, you will need a HUD consultant and there are some advantages to the HomeStyle over the others. All of these loans allow for the funds for repairs to be added into the loans and with this product you get the ARV on completion. You are also allowed to defer up to six months of payments, which is great for investors, as well as primary home owners. Unlike, the FHA products the borrower is allowed to add a pool, sauna, BBQ Pit, etc.

Born and raised in Chicago, Johnny Sharp graduated with his Bachelor of Arts in communications from Columbia College Chicago. He later moved to L.A. For the past 12 years, he has been in the mortgage industry as a senior loan originator. He brings decades of experience leading sales organizations to exceed revenue and profit goals. Driven by People First, Sharp entered the nonprofit world to assist those who had fallen on bad terms with their lenders. As an employee, of Operation HOPE he brought information to those in need, helping clients with credit issues, first-time home buyers, and business startups.