Residential Real Estate Loans

Residential Real Estate Loans

by William K. Matthews

Commercial lenders are following new standards on loans, which is producing a lot more due diligence on the borrowers than they were a year ago.

Residential loans are based upon the creditworthiness of the borrower.

The larger the loan the more due diligence is given by the loan officer. They need to know what is happening with paperwork and what is going on with the files.

During the real estate frenzy, if a credit score was in good standing, lenders did not question it. A buyer needs to be able to count on his broker to apply special attention to his files. He needs to be able to feel confident that the broker will be able to submit his paperwork to the appropriate lenders in order for him to get the best loan for his situation.

The best way for the broker to meet the needs of the buyer is to understand what is important to that particular buyer.

A knowledgeable mortgage broker will have the ability to represent the buyer's best interest. They give feedback to the client as far as what they are doing and who they have submitted the loan to. If there is more than one type of loan they explain the pros and cons to each type of loan so that the borrower can make an educated decision.

When the real estate market took a down turn, the industry had to change and go back to the basics of lending.

A well informed loan officer is on the phone to lenders and finding out what the underwriting criteria is for that lender.

For example: How does the lender treat stated self-employed borrowers? What do they do with a borrower who has five separate entities? The officer needs to understand what these lenders are looking for.

Now, loan officers are reevaluating their pipe line. They are looking closely at the type of borrowers they are working with. It may require them to advise the borrower to fix something on their credit report or change something that could delay the loan or refinance for a year.

A loan officer needs to be proactive in their clients file. If it is a refinance and a restructure of assets is in order, it could push the loan out a year.

The best thing a borrower can do, when it comes to buying a home, is to find out what they can reasonably afford and to educate themselves as to what is going on in the housing market.

A mortgage broker or a referral from someone is the best way to find a competent loan officer. The loan officer should be someone who knows the market. They can save you money, but can also help you buy the right property at the right price.

The advantage of using a mortgage broker is that they do a lot of business. They have access to lending sources, their opinion is not biased and they know the best way to do the process. You are paying them for their expertise.

Mortgage broker's can give the borrower options, alternatives, cost evaluations, and what the best avenue is to take. It is well worth taking twenty minutes and speaking with a broker to find out what the options are.

Based on excerpts from the commercial real estate investment talk show Capital Synergies. This episode's contributing guest speaker was Mr. Britt Miller, Vice President of Steelhead Capital.