I took calls from borrowers on Saturday to help the team during a very busy weekend and… promised interest rates that don’t exist.
The reason: I was offering first-time homebuyer credits that did not exist because the borrowers had too much income.
Two big reminders here:
- Beware of Income Limits: Fannie and Freddie offer tremendous discounts or credits for first-time homebuyers, in that they waive the impact that credit scores, down payment amounts, and property types have on the rate (lowering the rate as much as 1% in some cases). But those first-time homebuyer credits are subject to income limits equal to the Area Median Income (AMI), or 120% of Area Median Income in “high-cost areas” (like most of coastal CA). The income limit is $89,300 in San Antonio, TX, for example, and almost $200,000 in Oakland, CA.
- Don’t Let Senile Boomers Answer The Phone! You never know what they might try to give away.
Buying as an LLC – When Is It Kosher?
We constantly have investors asking if they can buy properties in the name of an LLC.
Our answer is yes, as long as they use Non-QM financing (DSCR, Bank Statement loans, No-Ratio loans, Asset Depletion loans, etc.), and as long as the properties are investment properties.
Fannie, Freddie, and jumbo financing require borrowers to vest in the name of an individual. Borrowers can then deed into an LLC after closing if they so desire.
Comparing Loan Estimates (Interest Rates Offered by Other Lenders)
I looked at two Loan Estimates for an acquaintance’s kids this weekend, as this is something we do often in fact.
- Our 1/4% Rule: We could have beaten the first one I saw by 1/8%, but I told the borrowers to stick with their lender because: they locked before rates went down, the rate quote was very fair, and we don’t steal loans from other lenders unless we can beat the rate by at least 1/4%. This is particularly the case when rates are falling and the other lender is clearly quoting very fairly.
- Credit Union 3/8% Above Market: The other quote I saw was shocking, to put it mildly. It was from a credit union that was 1/4% higher than our “no points” rate, and it came with a charge of almost 1 point. The technical term for this is “the borrower was getting his head ripped off.”I have nothing against credit unions, as my Granddaddy was a credit union, I took a credit union to prom in high school, and I still go for long walks on the beach with credit unions. But they are often not that competitive when it comes to conforming (Fannie/Freddie) loans.
