Fluctuating LTV

The loan-to-value (LTV) ratio is the amount a borrower can borrow from a lender compared to the appraised value of the property that he or she wants to buy. The LTV determines the amount of a down payment a borrower has to supply from his own pocket to invest in the property.

Loan-to-Value ratio = Mortgage amount ∕Appraised value of the property.

For example, if the lender offers a loan at a 90% loan-to-value ratio, the borrower must supply 10% of the total cost of the purchase. In a fix-n-flip loan the same is true, the lender that supplies up to 90% (for example) of the home purchase price, requires the borrower to provide the other 10% of the price.

The Coronavirus pandemic has changed things rapidly including the market value of homes, thus affecting the LTV ratios lenders depend on. Please call for the most up-to-date loan-to-value ratios on our loans for your upcoming projects. 512-213-2271

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Default

If a borrower defaults on a home loan, which is more likely to happen if they do not have much of their own money in the home, the lender takes back the home and sells it to get back the money they lent. Market fluctuations can cause lenders to lose money if the value of a house goes down and the borrower defaults on the loan. The value of the home may be less the amount of the loan. The coronavirus pandemic may make home prices goes down, but that is not certain and may not be true in all locations.

Equity

If the borrower had equity in the home and defaults, then the borrower loses the equity they have in the home because the lender takes the property and sells it to recoup their investment and expenses as quickly as possible.

Equity is the amount of money that would be returned to homeowner if the asset is liquidated (sold) and all debts are paid off. It is in a home owner’s best interest to sell a home before they default on a loan and pay the loan off if possible both so they can get their equity out of the home and so that they can keep their credit history in good shape.

FICO Score Requirements

The FICO score required on loans relates to the buyer’s credit history. It reflects how often they have been late or defaulted on loans in the past. Before the coronavirus pandemic set our lives, marketplace, and economy into a spin, REI Capital Resources required a FICO score of 650 on a hard money loan with a term of up to 24 months. Many people have lost their jobs and their credit scores have suffered. Watching the unemployment rate go up, lenders across the country have tightened up their FICO requirements and these requirements are changing daily. Please call me for our latest FICO requirements. 512-213-2271.

Selling to Avoid Foreclosure

Owners in default or facing default will sometimes take less than the market value for a house to avoid foreclosure. They may settle for only getting part of their equity back, reasoning that some is better than none. None is what they will get if they go into foreclosure and the lender takes back the property and sells it for the balance owed on the loan. The borrower may even give up all their equity to sell the house before defaulting to keep their credit history intact and their FICO scores high.

Buying Opportunity

The distressed homeowner’s situation becomes the buyer’s opportunity. The homeowner needs help to retain their high FICO score and some equity, and the fix-n-flip buyer needs to purchase a property for the lowest price. It can be a win-win deal.

As a direct lender, it is my job to help you get a purchase and rehab loan as quickly and as easily as possible. The perfect fit is still out there. Call me though for the most up-to-date information.

I am working online with the rest of you. If you need funding, fill out the BLN application at   http://reicapital.blnsoftware.com/ or send me an e-mail or give me a call.

Patrick St.Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash

Cloud on Title

A cloud on title is something odd about a deed for real property that has been recorded that might invalidate or impair the title.  It usually stems from unresolved issues with the property. Buyers should proceed with caution because there is something about the deed that requires closer attention.

Some examples of a cloud on a title include:

  • A wrong spelling of the property’s address in a deed conveying title.
  • Foreclosure proceedings underway by mortgager in response to a borrower defaulting on payment.
  • Failure to transfer certain property rights to the former owner, such as mineral rights.
  • A mortgage lien whose repayment has not been officially recorded with a local record office.
  • Covenants are rules, conditions, or restrictions place on a property by a subdivider or other landowner to create uniformity of building and uses within tracts of land or groups of lots.
  • Probate matters that involve estates and inheritance can create a cloud on title. If a property owner dies without a will defining who gains control of their estate, the property title may become in doubt as heirs challenge each other in court.
  • A fraudulent title recorded would create legal confusion and a cloud on the title.
  • An encumbrance is a claim or right held by some party other than the owner or a claim that is not a lien that limits the ownership of the property such as conditions, restrictions, easements, reservations, etc.
  • A mechanics lien placed on the property for construction work contracted.  The lien remains on the property and does not follow the owner, forcing a buyer to assume responsibility for repayment.
  • Any pending lawsuit before a court of law over ownership of the property.

Title Insurance

Title insurance protects the insured and their heirs from loss or damage due to defects, liens, or encumbrances in the title or actual ownership of the property as of the date of the policy.

A Clear Title

A clear title is one without any kind of impairment, lien, or levy from other parties and poses no question of legal ownership.

In most cases problems with a title can be cleared up when proper documents are submitted to the local record office.  This lifts the cloud on the title. This is not complete legal advice.  Please be sure to consult your real estate agent and attorney.

Closing Delays

One thing is sure:  a cloud on the title will slow down the paperwork associated with buying and selling property.

Patience may be a virtue, but it is one that is often tested when you are eager to close a loan and get on with your project. To save your dream and your nerves, Clean up the title ASAP. 

REI Capital Resources

REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations.  This is still true today.  

Give me a call or send an e-mail and share with me your plans and needs, and I’ll see what lending solution I can generate for you.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash
Info@REICapital.cash a hand an

Austin, Texas

References

https://www.investopedia.com/terms/c/cloud_on_title.asp

https://en.wikipedia.org/wiki/Cloud_on_title

http://www.realestateproarticles.com/Art/25272/263/What-You-Need-To-Know-About-A-Cloud-On-A-Title.html

Monumental News

Investors Lending Source (ILS) is changing its name to REI Capital Resources. And, I am proud to announce that I am now a direct hard money lender.

Why This matter?

REI Capital Resources works closely with its clients to determine the best path to take for an investment project that needs funding. As a lender originating loans myself, I have more and improved funding solutions at my fingertips.

We continue to offer private funds and now hard money Fix-n-Flip, Fix-to-Rent, and Refinance with Rehab loans. We have added a NEW 30-year long-term rental mortgage with 3- & 5-year interest-only options!

REI Capital Resources has funding sources for commercial projects as well as non-standard real estate projects such as church financing and oil & gas royalty programs, long-term rental financing for investors in the single-family residential market, and short-term financing for vacation or AirBnB lending.

What Has Not Changed?

Myself. My management. My focus. I am still focused on funding your success and I have more tools to work with. ILS built its reputation on finding private funding for investors for quick turn purchases and difficult situations. This is still true for REI Capital Resources.

Contact me

Patrick@REICapital.cash

http://www.REICapitalResources.cash

512-213-2271