Investor Mortgage Report 6.15.2020

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What We Know:

Rates on the conventional side have maintained strong with rates in the low 3’s. If you’re still wondering whether or not you should refinance, we’re going to dive into what we call ‘The Tipping Point Rate.’

This week, we’re seeing more larger non-conventional companies dipping their toes back into the investor loan water. This gentle ease back in helps increase liquidity, but it still comes at a price:  Lower LTVs and higher costs.

What This Means for You:

There is an exact rate where it’s wise to refinance. We call this ‘The Tipping Point Rate.’ This specific rate is the point where you won’t pay a penny more in principal and interest over the life of the loan.

Calculate the tipping point rate on your refinance

Going above this point might increase your cash flow, but it will end up costing you more in the long run. Sometimes this means it’s better to stick with what you have now.  We’re focused on putting more money in your pocket and less in the bank’s pocket.

This is for investors looking to increase monthly cash flow without adding lifetime cost of debt. So, if you’re solely concerned about your monthly cash flow, this probably isn’t the program for you.

So how does this work? Let’s take a look at an example.

Joe is an investor who is looking at refinancing to increase his cash flow every month. But not if it means paying tens of thousands of dollars extra to the bank in principal and interest.

Joe has been paying his current mortgage for 5 years. If he keeps the loan until it’s paid in full, he’ll end up paying $360k in payments over the next 25 years.

Joe wants to know the exact rate that he can refinance to a new 30-year fixed without increasing his amount owed. If it exceeds $360k, then he won’t refinance.

By knowing this exact rate, he can stretch his payments out and lower his interest rate without paying a penny more over the life of the loan.

How do we find Joe’s Tipping Point Rate?

Luckily, we have a handy program that can calculate just that.  If you would like to know your own Tipping Point Rate, send us an email!  We’ll run the report specifically for you and your property!

Note: The Cash Flow Company doesn’t currently lend in all states, but we are always happy to help and make sure you understand your numbers!

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Investor Mortgage Report 6.9.2020

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What We Know:

The markets are stabilizing, and underwriting term times are back in pre-Covid standards.

With rates for single-family investor properties on conforming loans hovering around the low 3’s, it might be time to look at locking in and increasing your cash flow.

What This Means for You:

As an investor, there is money in the money—Your money!

Your credit score is the key to keeping more of your money. No matter your income situation, the better your score, the cheaper the money. Cheaper money equals more cash in your pocket.

Investor Credit Score impact

Last week, we showed you how much money can be saved with a good credit score. Now, it’s time to go over how to increase that score quickly.

How to raise your score and increase your cash and cash flow

Want to save money as an investor? It might be time to crunch the numbers

Do you want to keep money in your life or keep supporting a banker’s life? We’re pretty sure we know the answer to that particular question.

They say that Vegas was not built on the gambler’s winnings. The same can be said about banks. Banks keep popping up everywhere, even when most banking has gone online.

 

Why is that? Because they know there’s money in your money.

 

So how can you better prepare your credit score for an investor loan?

  1. Plan before you apply by checking your score online.
  2. Stop applying for ANY credit at least 60 days before a loan application.
  3. Raise your score with one or two of these simple methods:
    • Use private money when you can and keep it off your credit. If you can borrow from a private individual or entity that doesn’t report on credit to pay off/down your credit, do it BEFORE your next statement date.
    • Don’t close paid off accounts.
    • Pay down your credit cards before due dates. This will take extra cash now, but it will save you tens of millions in the future.
    • Keep balances below 30% of outstanding balances on revolving accounts like credit cards.
    • Dispute any item that should not be on your report.

This list does not include paying your accounts on time. That’s a no-brainer. You should always pay on time. There’s typically no quick fix for late payments.

Stay tuned, because next up, we’ll be covering how to check your credit on your own! In the meantime, if you have questions about your score, what it’s costing you, or what a better score could save you, reach out! We’re always happy to go over the numbers with you!

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Investor Mortgage Report 6.2.2020

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Conventional mortgage rates are showing signs of improving.

Thankfully, it’s looking like another great week for standard conventional mortgage rates.

So far this week, all evidence is pointing towards increasing stability and improvements on the conventional mortgage front.

  • Depending on whether you pay your mortgage person points or you have them wrapped into your loan, rates fluctuate between low 3’s and low 4’s.
  • We’re seeing great rates on the conforming side.
  • Every week, the non-traditional loans are reappearing with increased frequency.  
  • Some lenders have decreased credit score requirements to 680.
  • Rates are still on average above 7%, but signs are showing that they will drop soon.
  • LTVs are inching higher, but not to the degree we have seen them in the past.

In short: conventional mortgage interest rates are really good. But what does that mean for you?

How do you know when it’s smart to refinance your rental (or any) property?

 

Let’s face it: as rates drop, the question of whether or not to refinance runs through all our minds.

Would you like to find out (without the sales pitch from your mortgage person?)

Anyone can crunch the numbers in just a few minutes with just a few items.

Yes. It involves math. But we swear it’s EASY. 

For now, all you need is a piece a paper, a pen, a calculator, and your mortgage information. (You can pull this info directly from your mortgage company’s website). Then, follow these three steps:

Step 1: Locate the amount you pay monthly for principal and interest. (Ignore everything but your principal and interest (i.e. taxes and insurance).

Step 2: Locate the number of months remaining on your loan. 

Step 3: Multiply your monthly payment by the number of months you have left on your loan. 

That’s it! 

 

Let’s look at an example:

A: Your monthly principal and interest payment is $1,200. 

B: You have 288 payments left on your loan.  

C: $1,200.00 X 288 = $345,600 

(Scary sometimes to see how much you really owe, isn’t it? Don’t panic.)

Now, let’s say that you have an opportunity to refinance and lower your interest rate with a new payment of $1,100. Should you do it?

 

Let’s take a look:

On your new loan, you’d pay $1,100.00 for 30 years (or 360 months). That’s $1,100.00 x 360 = $396,000.00

If you refinance, you’d increase your monthly cash flow $100.00. However, as a result, you’d pay an extra $50,400.00 over the life of your loan! 

So, is the extra $100/month worth an extra 72 months (6 years) of mortgage payments? Does refinancing make sense for you financially? Well, that’s up to you.

Perhaps cash flow is more important at this time in your business life and paying the extra years is ok with you. That’s a decision only you can make. At least when you know all the numbers, you can make your call an educated one.

 

Try it on all your loans and find out what makes sense for you!

 

Your payments __________________ Months remaining _______________

Total remaining to be paid ___________________

 

Okay, we’re sure a few questions are swimming around in your head, so we’ll see if we can answer some of the most common ones upfront:

Q: “What if I’m not going to keep the property for 24 or 30 years? At what point does it make sense to refinance?” 

A: That’s coming up in the next article.

 

Q: “What if I want to use those savings and pay down my mortgage?” 

A: We’ll be addressing that in a future article as well.

 

Q: “What is my breakeven interest rate?”

A: There are so many paths you can go down and we’ll cover as many as we can. We’ll also provide a tool for you to run all these scenarios.

 

Today, it’s all about knowing your raw numbers.

Want an investor tool that can run these numbers (plus your breakeven rate and many more) in seconds? We have one in the works. Just get on our contact list, and we’ll let you know when it’s ready!

By knowing these numbers, you can save tens of thousands on each refinance.

 

Don’t feel like doing this or worry the math might overwhelm you? No worries! Shoot us an email with your current statement and we can run them for you.

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Investor Mortgage Report 5.26.20

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Mortgage industry is showing signs of recovery.

The Mortgage Market is Showing Signs of Being on the Mend.

What We Know:

The mortgage market is finally showing signs that it is starting to recover and heal. As states begin to lift travel and business closure restrictions and reopen for commerce, lenders appear to be relaxing some of their restrictions in-kind.  Last week, we welcomed back a few lenders offering loans outside the standard conventional box.

This week, we see even more positive progress, such as lenders expanding the LTVs up to 70% on their investor cash flow loans (based on credit score and lease.)

We are noticing the lending requirements are a little more restrictive than before Covid-19, but at least additional options are making a comeback. Hopefully, this upward trend will continue over the following weeks.

What You Can Expect:

A return to business-as-usual won’t happen overnight, of course. The lower credit scores and higher LTVs will more than likely take some additional time to return to their pre-COVID closure state. Lenders will want more data on the unemployment and rental payment front before expanding.

Real estate investors may have to be more patient for normalcy to return to their lending markets.

Rates in the standard-conforming market are coming down.  For investors, 30-year rates are in the mid 3’s for purchases and no cash-out refinances.  Cash-out refinances are still a big challenge for investors, and will more than likely continue to be so for the next few months.

Expect to find the expanded requirements (up to 6 months reserves for each property) to be in place with underwriters through the end of the year.

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Investor Mortgage Report 5.19.20

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Non-Conventional Mortgage Loans Are Making a Comeback…

Non-conventional loans are closing again

Non-conventional mortgage loans are getting funded again.

What We Know:

Finally, we’re seeing an influx of non-conventional mortgage loans being funded. Hopefully, this positive change is bringing some relief to both investors and their buyers who don’t fit neatly into the conventional mortgage lending box.
 
Mortgage loans in this lending bucket typically do not require tax returns but rely on bank statements or leases for income.
 
Even though some are back, requirements for securing these loans have increased and are a little harder to obtain.  The majority of the lenders have a starting point of a max 65% LTV and a credit score of 700+.  The good news is the rates have not skyrocketed. There are now lenders lending who had previously been turning away would-be investors.
Light at the end of the lending tunnel

There’s a light at the end of the lending tunnel again.

 

The Takeaway:

We are on the road to lending opening back up. The economic restrictions and resulting uncertainty appear to be lessening. Apparently, to the point where lenders are feeling confident enough to begin closing riskier deals again.
Make no mistake, it will be a slow process. But there appears to be a light at the end of the COVID lending tunnel. Stay tuned as we provide continuing outlook updates over the course of the coming weeks.
In the meantime, if you’d like to review your financing options for investment properties, feel free to reach out! We’re always happy to run your numbers with you.
*All non-commercial and construction loans offered by TNS Loans NMLS #1719349
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Investor Mortgage Report 5.12.2020

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Remote Closings And You: How COVID-19 Has Redefined the Real Estate Closing Process

 

What We Know:

The financial side of real estate has been stalled on many fronts these past few months due to the economic lockdown.

 

Offices are closing, and would-be buyers are losing their jobs. Appraisers aren’t allowed into properties, title companies are limiting closings. There are also complications of safely converting everyone’s office jobs to work-from-home positions.  This influx of rapid-fire changes puts a strain on the mortgage process and adds stress to closing on properties.

 

But, things are improving. We are beginning to see some positive changes thanks to the introduction of remote and online closings.  

 

What Is Changing:

For starters, buyers and sellers are no longer required to physically drive across town at a prescribed hour that works for everyone and suit up with masks and gloves for a closing.

Closing from Home

Systems are now in place for closings to happen 100% from the comfort of home or office ( or really, anywhere you need to be.)  Remote closings are real and they’re happening, along with simple remote notarizations. These simple adaptations eliminate so many hurdles to the closing process and help speed things along, especially in these unique times.

 

Fidelity, one of the largest title companies in the industry, is all-in with the remote advancements and allowing clients to choose how they close.

 

What the Future Holds:

We could be heading for a time when remote appraisals are standard and virtual showings become the norm.  It’s not as far-fetched as it sounds. We’re inching closer to that reality by the day.

Remote Closings

Just imagine the mortgage process taking place in a week or two, and not months!

 

Of course, this is good news for investors selling SFR properties and/or refinancing.  Landlords owning commercial properties may see values drop. After all, more people are working from home without having to physically come into an office.

 

On the rate front, we’re seeing very stable numbers. However, we’re still staring at a wall when it comes to refinancing.

 

As states open up and lift restrictions, let’s hope people run out and get back to work and start spending like we are all used to.

 

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Investor Mortgage Report 5.5.2020

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Refinancing may have just become more expensive for both rate and lower LTVs.

 

Wow, what is this? The powers that be are still messing with our beautiful lending world. It’s not a shock that government officials seem more focused on getting votes at the cost of property owners and mortgage companies, encouraging tenants not to pay rents and not lending a hand with evictions.

 

What We Know:

Mortgage rates are so low right now (in the mid 2’s for owner-occupied, and low 3’s for investors) that still-employed buyers should be running out and buying homes left and right.  After all, the number one reason buyers purchase is that they can fit the payment into their monthly budget. We should be seeing mortgage companies throwing money out to everyone. We should see buyers buying and investors refinancing (increasing that cashflow without adding more properties.)

 

 

So why isn’t that happening?

 

In short- our government is hard at work wreaking havoc in the lending markets, making it harder for all of us to get a loan, especially refinances.

 

Sure, it sounds good in theory: Allow anyone who wants to defer a payment or 4 during an economic crisis to do so, without proving any reason based on financial hardship.

 

How does this impact us all?  Glad you asked.

 

If a lender helps someone out and refinances them and they decided to go directly into forbearance, (yes, people WERE doing cash-out refinances with the plan of deferring payments to take advantage of the government’s kindness,) that lender cannot sell or move that loan off of their books to those that service FHA, VA, Conventional loans, etc, unless they want to take pay a huge fee. So, they decide to hold the loans, thus filling up their lending bucket.

 

So what happens next?  The lenders don’t want to take a chance that a percentage of people are going to take advantage of this opportunity, so they raise the cost of refinancing for everyone.  On top of that, they will start lowering the LTVs (loan-to-value ratios,) making the box for traditional financing harder for all.

 

Yes, obviously those that need mortgage forbearance should be able to use it, but it’s the ones who are not in financial need that are making these numbers grow, creating more costly financing for us all.

 

Let’s look at the numbers from an article from MBA.com from the end of April:

 

Key findings of MBA’s Forbearance and Call Volume Survey – April 13-19, 2020

  • Total loans in forbearance grew relative to the previous week (from 5.95% to 6.99%.) In comparison, only 0.25% of all loans were in forbearance for the week of March 2.
    • By investor type, Ginnie Mae loans grew the most relative to the prior week: from 8.26% to 9.73%.
    • The share of Fannie Mae and Freddie Mac loans in forbearance increased relative to the prior week: from 4.64% to 5.46%.
    • The share of other loans (e.g. private-label securities and portfolio loans) in forbearance increased relative to the prior week: from 6.43% to 7.52%.
  • Forbearance requests as a percent of servicing portfolio volume (#) dropped relative to the prior week: from 1.79% to 1.14%.

What You Can Do:

Keep up with your payments if you’re able. The more of us that are paying on time and in full, the quicker the lenders will start to relax and start loaning again. Everyone wins.

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Investor Mortgage Report 4.28.2020

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States are slowly opening back up into an uncharted post-COVID19 closure world, but how does this affect the lending markets?

 

Some states have started to allow the gradual re-opening of businesses as stay-at-home orders begin to relax around the country.  What effect will this have on mortgages, rates, and availability of lending to investors?

 

What We Know:

Here’s what we think is reasonable to expect as we return to our new version of “normal”:

 

As businesses start opening up, there will be an influx of people employed and able to make their rent and mortgage payments.

 

The majority of the traditional lenders left investors out to dry over concerns of rents being paid. Government officials haven’t helped the matter with proposals to postpone or forego rent payments.  If tenant rents are not paid, how will investors react? Will they still be able to make their payments?  Will it affect those with larger portfolios to a greater degree than those with smaller ones?

 

These serious (and unanswered) questions are the main reason we have little to no funding options at the moment.

 

The only way we put these concerns to rest is by people going back to work (if they’re able.)  Feeling out the new “normal” flow of payments will help bring certainty to the lenders so that they can decide whether to open lending back up (at a limited pace and with tighter guidelines,) or keep it as-is (little to no options.)

 

The fate of the traditional lending world will hinge on payments: Those made by renters as they return to the workforce, and subsequently, those made by their landlords.

 

What You Can Do:

Be optimistic for more certainty over the coming weeks. As individual states’ economies reopen, let’s remain hopeful that jobs are still there, people want to go back to work, and that they are able to keep up with their payments.

Lastly, also let’s encourage government officials to stop putting out the idea that renters can “forgo” their rents.  This helps no one currently holding a mortgage (unless you want votes.)

 

Want to stay in the loop with the latest assessments of the lending climate, and ideas on how to keep your real estate investments funded in these trying times?

Sign up for our weekly industry newsletter and upcoming OPM webinar series here >>>

 

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Investor Mortgage Report 4.21.2020

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Investor mortgage report

The going is still tough out there for real estate investors looking for traditional financing.

 

 

What We Know:

This week doesn’t bring much (if any) relief to the mortgage markets.  The Feds have slowed down buying mortgage back securities and closings are still tough.

 

We are seeing the majority of our payoffs being delayed 2-3 weeks as mortgage companies push loans through these uncertain times.

 

Unfortunately, this means–once again–the real estate investor doesn’t rank high on their list of loans to close (or close fast).

 

The good news? There are still lending options for Real Estate Investors.  You just need to know where to find them.

 

Even though most traditional lending options are currently off the table, there is still one source that is interested in lending to real estate investors (at least in some markets):

Credit unions.

 

 

According to our market research, there are still a couple of credit unions maintaining business as usual. Better yet, they are still lending with good terms on rental properties.

 

Why do they seem less impacted than the rest of the lending world?  The answer is heavily based on their loan mix. Unlike banks, credit unions do not have a heavy investment in all these small businesses that have closed down. (Remember, the closure of small businesses impacts banks via deposits and bad loans. Bad loans create a need for banks to slow down on all lending.) Secondly, a good deal of their mortgages are kept inside the credit union, and don’t rely on secondary markets to keep lending.

 

So, if they can make a good loan on a piece of real estate, they will.

 

What You Can Do:

Of course, not every credit union lends on rental properties. You will need to call around in your market to find out which ones offer this service.  

 

 

Also consider that the ones who are doing these loans will be BUSY, and you’ll need to be patient.  It took us 2 days just to get a call-back…that is just reality in the strange times we’re living in.

 

Want to stay on top of what’s happening in the market, as well as what you can do to help your investor business thrive in a post-pandemic lending world? Get signed up for our weekly webinar series and join our mailing list for info, insights, and action items geared toward helping you take the guesswork out of your funding.

 

Sign up here >>>>

 

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Investor Mortgage Report 4.14.2020

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Investor mortgage report

Why did all the banks just make it damn near impossible to get a loan on an investment property?

 

 

For lenders, times are more uncertain than ever.

 

With conventional/standard loans as the only lending option available for rental investors, lenders went and changed the rules…and not in the investor’s favor.

 

As of this week, the new underwriting criteria has hit 90% + of the market for investor loans on rental properties. Plus, most lenders now require a minimum of 6 months reserves (and, a lot of times, up to 12 months) for every rental property that has a loan on it. That’s right. If you have four rental properties, you now need at least 6 months of payment reserves on each property. That adds up quickly.

 

That may not even be the worst of it.

 

In addition, most lenders are not allowing borrowers to use the rental income from their properties to qualify. If they do, they might only allow a very low percentage of the rent (like 50% of gross rent). That means if you have rent coming into a property at $2K, they may only count 50%, or $1K, of that towards your expenses (if they allow you to use it at all). In this example, if the rental property has expenses at or above $1K (and most will) the underwriters will expect you to cover the shortage with other non-rental cash flow.

 

So, if you don’t have great credit (lenders have raised the threshold here, too) and other income to qualify for a new loan, you will be out of luck…for now.

 

We don’t know how long this will last. It might be weeks, but more likely months. Nobody will know until banks and lenders figure out how current stay at home orders will affect the markets.

 

So, why exactly is this happening?

 

 

Once the lenders get the data, they will adjust. Let’s cross our fingers that rents are being paid and, likewise, mortgages are kept up.  This flow of money will help bring lenders and loan choices back to our market.

 

What can you do?

 

  • Keep informed on what is happening in the lending markets. If you are selling properties, then stay updated for your potential buyers, too.
  • Keep paying your mortgages. This will help the overall market, but especially you when you are looking to borrow in the future for better rates (the rates are expected to be great after we return to some normal) or new opportunities.
  • Keep your credit score high and keep working with your renters to pay what they can when they can.

 

Remember the loans and rates will come back. When they do, be prepared to take advantage.

 

If you have a credit score at or above 760, and have ability to income qualify, then your rate estimates this week for conventional loans look like the following:

 

  • Paying closing costs rates for rental properties (1-4 units) in the high 3’s for a rate and term. Typical break-even point is between 2 and 2.5 years.
  • Paying little to no closing costs rates are high 4’s (best for strategies for keeping a property under 2.5 years).

 

If you want to know where you stand and what you can do, schedule a time to discuss your lending needs with us today by emailing mike@thecashflowcompany.com.

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