Here’s Why Now is Great Time to Get a Loan
Mark Steven Cook is a well-established ‘financial solutions architect’ and a generous humanitarian. He specialises in both real estate lending and real estate investing. He has over 30 years of real estate industry experience and has personally been involved in hundreds of fix and flip transactions, as well as conventional home loans. Currently, he is the Chief Operating Officer for ZeusLending.com where he provides day-to-day oversight of their operations.
Mark has a passion for providing exceptional customer service and teaching others the art of real estate investing. He often provides training and educational presentations to groups interested in real estate investing. Below, we speak with him about the way the pandemic has affected lending and whether now’s a good time to get a loan or not.
From your experience, in what ways has the current pandemic affected loans?
Initially, the COVID-19 pandemic put the industry on high alert. No one was sure what would happen. And widespread unemployment can certainly be a factor. That said, Texas has strong employment and a low cost of living. We tend to weather such storms well. Right now, our local real estate market is experiencing a very low inventory. It’s an excellent time for real estate investors who can find a property to fix and flip because demand for the finished product exceeds the supply. And there has actually been an increase in demand this past year; particularly for refis due to the low-interest rates.
Have you been busier during the past twelve months and if so, how have you navigated this?
All lenders have struggled a little with those third-party vendors on which we rely; particularly appraisers who as you can imagine had issues with inspecting properties in person. However, Zeus is the leader in online real estate lending™ and that has positioned us very well during the pandemic. We can complete the entire loan process with all our usual personal and friendly service without the borrower ever having to leave their home.
Do you think that getting a loan during the current uncertain times is a good idea?
This is a question we’ve received time and time again since the COVID-19 pandemic began: Is now a good time to get a home loan or mortgage? Unfortunately, there’s no one, single answer that applies to everyone! Every potential borrower has a different set of circumstances, including credit score, financial assets, income, and other factors. For most people, however, the experts at ZeusLending would say ‘yes’ – now is a great time to get a loan!
Lenders are still lending money during the pandemic, and borrowers are still buying homes and investment properties. Interest rates are super low as the economy struggles under the weight of the crisis. Perhaps counterintuitively, the demand for homes and property has not dipped a bit. For many, it has proven to be relatively easy to qualify for an affordable loan in 2021 thanks to the influx of deals and properties purchased during the pandemic. The number of people seeking a great deal has increased competition not only for homebuyers but for lenders as well. That competition results in great terms for many borrowers!
During the pandemic, some lenders are being very careful to closely examine borrowers’ credit histories. Due to the uncertainty regarding the future that the pandemic has caused, banks are tightening up on lending to homebuyers who are credit-challenged. The market instability caused by COVID-19 and the higher risks that instability poses make lenders a little more cautious.
Another factor many lenders may scrutinise during the pandemic is a homebuyer’s income. Verification of employment will likely weigh heavily in determining the likelihood of a borrower’s employment continuing. Borrowers need to make sure all their income is accounted for and will be reflected in the verification of employment.
Borrowers need to be prepared to strategise their best approach: If they need non-traditional lending, having a loan officer and mortgage company that is able to customise solutions for you and your specific scenario is key. Innovative lending solutions are ZeusLending’s speciality! Because we offer so many different loan products, our borrowers have more available options to prove their ability to repay.
What are the biggest mistakes people make when buying real estate?
Finding the lowest interest rate is not always the best deal.
Some loans have very attractive interest rates (also known as teaser rates) but you may be hit with higher upfront charges.
Points and or origination fees are the most common ways to lower the rate and charge upfront costs. Points and origination fees are calculated as a percentage of the loan amount. For example: Often the difference in monthly payments from a slightly higher interest rate takes 10 years to equal these upfront costs. Many people will have refinanced or purchased another home before this occurs.
Adjustable Rate Mortgages (ARMs) and Balloon Mortgages.
ARM rates will adjust depending on the loan. The ARM rates may adjust as often as every six months, but in most cases, they adjust after 1,2,3, and 5 years. Those rates are far more likely to go up when they adjust. The Balloon Mortgage requires the borrower to pay the loan off when it matures, usually between two – seven years.
There are many lending tactics to sell the borrower on a low rate and then charge outrageous fees and costs. Borrowers need to watch out for the “bait and switch” lending ploy.
Buying FHA, VA, or IRS repossessed homes may be a mistake.
I am not against purchasing a repossessed or discounted property. In many markets, especially those that are having financial trouble, a repossessed home may make good sense. But keep in mind:
- Many VA, FHA, and IRS repossessed homes are sold with virtually no warranty. Also, the borrower may be limited on how much they can inspect the property prior to purchasing it. Often these houses need repair work. Not being able to thoroughly inspect the property puts the purchaser in a risky position.
- Purchasing this type of property requires bidding for it. The people borrowers would be bidding against rehab houses for a living; so, they may be at a disadvantage from an experience standpoint.
- In addition, most homes that are for sale under these conditions require a substantial upfront deposit that may not be refundable should their loan not close within a specific period.
- And, once the seller of the home accepts their offer on these properties, the bank that owns the current mortgage generally has to agree to everything as well. This can sometimes be a lengthy process that many homebuyers are not aware of. It is always important to set realistic time expectations for yourself.
Making large purchases before purchasing a home.
It is very common to get so excited about buying a new house that homebuyers go out and buy new furniture or even a new car before closing on the house – this is a big mistake. Doing so can radically change the credit profile and the debt to income ratio. Too many otherwise good applicants end up rejected at the last minute because of a big spend during this window.
Working with a mortgage lender who only has one product to sell may not meet everyone’s specific needs.
Most lenders only have one source of funds. This type of lender is forced to “fit” the customer into a pre-fabricated loan program. They only have one or two different ways to handle the many different loan situations that occur. It is important that customers research lenders with multiple products and the ability to customise their loans. We feel an educated borrower has the ability to make the decision that is best for them.
Not getting a pre-approval from your mortgage company before you start shopping for a home.
Having a pre-approved loan can be very important. A pre-approval has two major benefits. First, there is the peace of mind before getting serious about buying a home. Homebuyers will know how much of a house they can afford, what the payments will be, and how much of a down payment is needed. Secondly, having a pre-approval may give homebuyers bargaining power when negotiating a price for the home. Getting pre-approved could save homebuyers a lot of time and money.
What are your predictions for the lending sector in 2021?
As I mentioned, currently there’s a low inventory market for homebuyers. But there are also supply off-market properties including foreclosures, bank REO and wholesale properties. The trend I see is that the residential real estate investors will take advantage of this low-inventory created demand and will snap up these properties, renovate them, and re-market them.