Podcast: First Time Home Buyer
For this podcast I sat down with Walt Wollet, mortgage loan officer with Pacific Residential where we discussed his experience as a first time home buyer. Learn about the home buying process from the perspective of a mortgage lender and how handled the process and what things he might have changed to make it even better. You can connect with Walt Wollet on LinkedIn, Facebook.
You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram. About the author: The above Podcast “Podcast: First Time Home Buyer” was provided by Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. With over 10+ years experience, if you’re thinking of selling or buying, I would love to share my marketing knowledge and expertise.
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Adams, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
[00:00:09] Paul Sian: Hello, everybody. This is Paul Sian, Realtor with United Real Estate license in the state of Ohio and Kentucky. And with me today is a returning guest, Walt Wallet with 5th 3rd Bank. He was with a different lender in the past, and now he’s with 5th. 3rd. We’ll talk Are you doing today?
[00:00:24] Walt Wollet: I am fantastic today, Paul. We’re out here at the on my new piece of property that you helped me acquire and I’m excited. Toe do a podcast. It’s been a while.
[00:00:36] Paul Sian: Yeah, that’s that’s one of the reasons to that we decided to do this. Podcast is hey, your lender. I’m the You know, I’ve been through the process of myself of buying my own house as a real real estate agent, so I know how it is. So let’s we want to get the perspective of a mortgage lender, you know, buying the house. So I guess let’s just start from the very beginning. What’s what’s the first step that anybody has to do If they’re they’re interested in buying a house, they skip, you know, leave out the real estate agent. They know they want to buy a house, and they’re gonna talk to a lender at 5th, 3rd, and that happens to be you. So what’s their What’s their first step?
[00:01:10] Walt Wollet: So for my first step, and we talked a little bit before this about just being an active consumer, and we’ll get more into that. But it really it really what I what I would tell people is that you need to do an honest debt analysis, and you honestly need to look at budgeting eso. You need thio when you’re when you’re buying a place you need, you need to take in all what all those costs are, you know? So what are the costs that you know you have to pay every month, is there, You know, do you have a $40 credit card bill you pay every month? Your cars? You know, your auto loans, whatever, whatever you pay every month and you need you need to analyze that. Um, just just so that way you’re not wasting your time, right? So it’s like the first thing I would do is get is get pre qualified or talk to a lender, you know, And I’m an insider, so I kind of knew what I had to do and what I did was before I got pre qualified, was paid off, paid off all my credit cards because I could, um, you know, just to make sure that when my credit was pulled, I had I had a score that was higher so that I could get the best rate in terms that are available. Um, so that that was that was that was a big That was a big thing that I that I did your credit score a big part of it is is factored by credit utilization. So a lot of times, people that are borderline approval if they can get, get added to a secure card or get added to, you know, another account, unauthorized user account or pay down credit cards, Um, you know, say from 70% to below 50% utilization than their score could shoot up. And we can, you know, we can qualify them for, for for what they really want to buy. So that that that that would say that would be the first step is always to just talk to different lenders and talk to different people. Don’t go toe one lender and just trust them and like I wouldn’t want any what, buddy? That I work with to just talk to me. I want them to do their own research. And I want them to know that I’m going to take care of them now If they find someone else that maybe is promising them better numbers or whatever. You know, we I hope that we can talk about that. But, you know, at the end of the day, we have toe, we have to perform and do what’s best for consumers. Yeah,
[00:03:27] Paul Sian: definitely looking at that. Going back to the the credit score. And you mentioned credit score affects your your interest rate. And you know what? Let’s do you have Ah, breakdown. Basically, you know what? What credit scores and how how much impact on your interest rate is? I mean, is it is something easy to quantify? Or is it a little more, you know, computer oriented than that or computer algorithm oriented than that?
[00:03:53] Walt Wollet: So this is another. This is another question. Where it gets into every bank is gonna be different on that account. Okay, so you have the agencies Fannie and Freddie, right? That that back these the back these loans and securitized these loans. And they said, Ah, lot of what the fees and charges are on on those you know on those products and and those were built in to the actual interest rate into the actual loan. In a lot of cases,
[00:04:21] Paul Sian: those almost like base fees,
[00:04:22] Walt Wollet: right? But then other people. So what a lot of banks will do and Chase Chase is an example is notorious for this, but so say they don’t want They don’t want a certain loan. They still legally have to offer it. But they’ll raise the interest rate on that product so that they don’t have to, you know, originate or services many of those loans. So, you know, truthfully, you know certain certain companies will do that with government loans if they don’t want, You know, they don’t want to deal with the potential risk of having the the agency’s forced them to buy back those loans if there’s any sort of auditing or documentation issues, so they just set their their margins, you know, like this that their rate really high, um, to try to dissuade people from applying and you’re seeing that a lot with refinances that some of the larger lenders now, too, Just for the same. The same exact reason.
[00:05:17] Paul Sian: So what do you tell us about some of the hiccups that you had happened to you in your specific alone while you were trying to buy a house?
[00:05:25] Walt Wollet: So I would say that I would say that any hiccups we had Mike, who helped helped who helped us out on this purchase, did a did a great job with, you know, a soon as stuff came out of underwriting. Soon as underwriting came back with a message, he would reach out to me and anything we needed, we would get. We did a good job together. Me being an insider, of documenting everything up front that we needed Thio. So any letters of explanation and any sort of thing like that, I’d say that the biggest hiccup was probably and especially right now with Kobe, it was the appraiser. So you way had required a desktop appraisal on this purchase, which is essentially a drive by appraisal. Now, typically, you know, in any other market, a normal market. I guess you might say you would have that appraiser reach out. They would be reaching out to the selling agent so the agent would know. Okay. The appraiser has seen the property. They’re out here
[00:06:25] Paul Sian: there physically walked in the property, right? And almost like a home inspection,
[00:06:28] Walt Wollet: right? And so that didn’t happen with this purchase, I guess. I think he pulled. He might have pulled into the back, you know, a little bit and checked out some of the buildings and took off, right. Um and then and then the appraisal came back. Luckily, was all good, but I think one of the hiccups was just that. That that cellar not knowing that the that the appraisal was done and that the seller’s agent not knowing. And that kind of elevated there, um, anxiety, right?
[00:06:55] Paul Sian: E, remember talking with the seller’s agent, basically, you know? Hey, when’s the appraisal happening? And, you know, I asked, I did ask the agent. You know, did they praise will call you and that kind of send up red flag on her part unintentionally because, you know, they won’t be contacting her. They would just be driving by, you know, looking at the back of building or looking, walking the building that really get, you know, looking to get inside the building.
[00:07:20] Walt Wollet: But as far as just just hiccups now and generally on in this market with loans is ah, big thing I talked to with my team and my manager all the time is just getting things in is clean and as clear as possible, you know? So what I think a lot of especially first time clients don’t understand is you cannot tell me that your student loan payment is this when really, it’s this and you cannot You cannot say that you make this much money when really you make this much money and every little detail of that application is gonna be verified and is gonna be put through extreme due diligence. So with that said, you know, like where when where we run into problems or where any lender will run into problems is when the story changes, you know? So it Z okay, we’re calculating, you know, 40 hours a week for your income, and then we get you know, the verification of employment back. And it’s it’s 32 you know, a week. Um, even though your recent pay stub stay safe 40 like, you know, those kind of issues I think everyone runs into and deals with, and it’s just like we have to have it perfect, you know? So if we’re talking about homeowners insurance numbers up front and this is what they are, and this is what you know, this is what they need to be. Then that’s what it is, you know. So we can’t I guess we can’t have, you know, radical changes in process or else you’re gonna have a loan that goes on forever and ever.
[00:08:45] Paul Sian: Yeah. So make sure you, you know, you’re dot your I’s cross your T’s and making sure the information is 100% correct. I mean, probably one of the best ways to do that is, you know, go on your own, pull your own credit report. Make sure you see all your accounts. Kinda like you had mentioned the beginning. Take a look at all your debts and and your assets as well. You know, make sure all your income is properly documented. Make sure all that’s documented. You know, the numbers that you’re reporting are what you’re being, what it is being reported to the lender that way. It you know, it’s smoother process underwriting is gonna have less less questions and you know you’re the one will go through easier,
[00:09:20] Walt Wollet: definitely. And one thing that I advise a lot of people to is I like to have, if possible, if time permits have that credit conversation with the clients up front. So even, you know, two weeks before they’re ready to shop, you know, even months before ideally, we talk about the credit and that there was a There was a case recently with a friend of mine, a client who’s a doctor, and he had mentioned, though I you know, I have this collection from this utility and I don’t know where it came from. And you know, there’s there’s laws that debt collectors and that people have to follow. And a lot of times you know what we’re seeing in the world, right is with with corruption and people not following rules and people not doing what they need to dio Ah, lot of times you as a consumer and you do you have rights to dispute that and toe thio and try to clean up that information yourself. The, uh, credit bureaus have legally every year have to send you a copy of your credit report if you request it so and I always advise people to do that, definitely
[00:10:21] Paul Sian: take a look at it. It mentioned fees earlier. We talked about a little bit about lenders fees and let’s talk a little bit more. I mean, what? We have your base fees that the the these other, like government sponsored entities, so to speak, the Fannie Mae Freddie Mac’s that they have charged. What sort of extra fees are you know, Banks, tacking on the loan and whatever. I guess what? Some of the reasons for these fees
[00:10:45] Walt Wollet: so every every loan requires people that work on it. So one thing is, is that I always say is you know, I would advise consumers toe, look at different lenders and talk to different people Now, I’ll tell you right now that cheaper is definitely definitely, definitely not always better. And a lot of times there are lenders out there that you know they’re overpriced and they’re at the top of the market and they know it, um, and so I guess there’s a There’s a huge discrepancy between fees in various programs and various lenders, and it’s just a matter of going and asking those questions. Okay? What is you know, why is the processing fee this why, you know, what’s this underwriting fee? And then it’s always okay to ask. Well, hey, is there anything we can we can do about this? So in my case, when it comes toe the fees or the stuff that I that I had to pay for it. So you know, certain things that the bank paid for because I’m an employee, which is a great benefit to us. Um, you know, help me, Help me, you know, save money. As I bought this place, one thing that a lot of buyers don’t think about is all those incidental fees. So every home inspection is 4 to $500. You know, every, um, you know, just just buying garbage cans out here was $150 you know? So there’s these. There’s these costs that come up, you know, the wax seal on the toilet stuff will come up, and you just have to make sure that you have that budget it in and that you’re prepared for those expenses. And so, like we you know, a lot of times if there’s multiple people living in a house and it’s it’s one person on the loan, you know, like that’s when I’ll look at it and be like Okay, well, you know, really, there’s three people that are gonna be living in this house. Three people sharing expenses. It’s different. Um, but those kind of loans are are always more difficult, you know? So you really want to make sure that, um, you understand all the costs involved, Especially if you’re especially if your debt to income ratio is higher as it is because you have a lot more expenses. So,
[00:12:54] Paul Sian: yeah, we’re talking about those fees. I mean, it’s almost example is some of the car dealers used car dealers or even new car dealers? I mean, you know, the you get through the negotiation process you got, you got the price on the car, and then you go talk to the finance finance manager quote unquote. And that’s where they you know, they start trying to tack in all these, you know? Hey, let me let me throw this warranty on you. Let me throw, you know, non, you know, payment protection in case you’re disabled. Campaign and So that’s where they start packing in things, packing their basically fees. You know, they’re fattening the bottom line of the car dealer, of course. And you know, that’s that’s part of their job. But you know, the same time to as consumers, our job is to look at that critically and say, You know, do I really need that? You know, Do I need a no payment fee? You know, because I’m disabled. I’m not currently working, but at the same time to, you know, turn around, look at your auto insurance or look at your homeowners insurance. Are they providing some similar coverage that you know that you would need or you know would would avoid? And least in that case, in the autos auto example, It’s not so clear cut. You always don’t have that type of thing. You know you’re homeowners insurance. Not necessary gonna cover you. You know, if you can’t, you can’t pay the mortgage, but there might be other, some other benefit or some other protection. You know, your employer might be offering something for you too, you know. Why pay the extra fee to the lender. You know, when it’s saving you money and they’re just trying to pad their bottom line versus, you know, you’re trying to save your dollar and you know, it’s a long term purchase you’re investing for, you know, 2030 years. Mawr costs them or the higher the interest rate. I mean, the more you’re paying overtime,
[00:14:35] Walt Wollet: and that’s why it’s so. It’s so important up front. You have, You have power is a consumer, you know, like and lenders, you know, if if any lender doesn’t, you know, it doesn’t wanna be competitive. That za red flag, probably. You know, so especially with with us in the bigger banks, you know, we we have you know, we did until, you know, kind of some of the, you know, the new fee with Fannie and Freddie for refinances, um, kind of cut into our margins a little bit. But, you know, we’re willing, toe, do you know we’re willing to do whatever we can do toe win business, you know? But at the same time, we have to pay people off a fair wage and we employ Americans, you know, So that Z you know, that can can be a difference, right? But it’s just a matter of like weighing, weighing out things. You know different. You know this. This lender might have the best deal, but they might take a really long time to get it done. You know this lender there there really fast, But they’re very expensive, you know? And what’s the What’s the trade off? And so you know, it’s always good toe talk to multiple people about that to gain a broader understanding for yourself.
[00:15:46] Paul Sian: How are they giving those fees? I mean, I’m presuming you need to get a credit report. Run right, Okay. And then how how big of an impact is that? You know, you’re getting multiple credit reports. Let’s say I talkto 34 lenders and I say, Okay, go ahead, run my credit if I, if I do it over the same day or a couple of months, is a big difference.
[00:16:05] Walt Wollet: So as as Faras a assed faras, a hit on the credit report. Yes, it’s it’s 30 days, so you’re allowed. What sends a red flag to the to the bureau’s is when you shop for a bunch of different things. So say that when I was buying this house, I also have my credit pulled for a car and I had my credit pull it for a tractor on and I did all this financing stuff. Well, my credit score, which just start to tank because it’s because the way the agencies that their algorithms or reading that is this person doesn’t have any cash right there. They’re financing everything you know. Here’s another credit card inquiry, so it’s all within that 30 day window. So you legally you get your credit pulled once with a lender, and then you have 30 days and you could have the credit polled, so long as it’s a mortgage inquiry and not any sort of general finance inquiry. And it’s how they’re coded to the to the actual credit providers, right? But so long as it’s a mortgage inquiry, it only it’s only gonna count is one hard inquiry. So you you’re you’re the credit agencies. They don’t wanna dissuade people from shopping for mortgages because we need to have a fair, you know, a fair and ethical mortgage market. Um, and it and it iss you know it. It’s definitely better than at what I’ve heard about, you know, from from some of the people I work with in before 2000 and eight. Right? But, um,
[00:17:30] Paul Sian: but comparison comparison shopping is, uh, could be a big saver. I mean, you know, thousands upon thousands over the life of the loan. Definitely going back. Now, we’re going back to your own personal experience looking. You know, hindsight is 2020 looking back at the whole process. Is there something you think you could have done better? That you know, would be good advice for somebody else?
[00:17:51] Walt Wollet: Yeah, I think I am. I think I probably I probably should have paid off all my all my dead sooner, you know? So that was that was one thing is I really, um
[00:18:05] Paul Sian: when you say sooner, how much sooner? And say prior to applying the loan. How much quicker should you have done
[00:18:12] Walt Wollet: that? So just as an example, I had There’s a company. There’s a rental verification company, and I pay them a fee toe, add toe, add my rental trade lines to my credit report, and those were not added before my credit report was pulled. So just like things like that that I had done to strengthen my credit profile in my score, they weren’t reported, right. And then I paid off all my cards, like I said, but some of them were still reporting balances when we pulled s. So it was kind of like take
[00:18:45] Paul Sian: 30 to 60 days for some companies report.
[00:18:47] Walt Wollet: Exactly. And so And here’s what I found out is that you most companies will offer what’s called off cycle reporting so you can call them like, Hey, I’m you know, I’m gonna get my credit pulled for, you know, this investment property loan. And I just paid off this credit card. I’d like it to report. And so some of them were honest with me, and they’re like, Oh, well, yeah, we can report And they did, and others said they did, but they didn’t. And it’s just the nature of, you know, the nature of it. So I would I would say a lot of that stuff. I would I would just, you know, I would just get it done as soon as possible. If you know, you know, if you know that, that’s gonna happen. Like I had my I had my credit pull twice for this home purchase. Um, because the original credit report expired right. Um, and I did that in February, you know? So I knew in February like, Okay, that’s what my actual score is. And then I use that credit report to attack the, you know, some of the balances and anything. Any other derogatory is that we’re keeping my score lower than where where I wanted it to be. Okay, so
[00:19:50] Paul Sian: all great advice and all great conversation. So I appreciate you taking the time to be on this podcast with me. Any final thoughts?
[00:19:59] Walt Wollet: Um, I, uh I just I just say everyone stay safe out there. And, um, you know, it’s just like with with what we’re talking about with with lenders, you know, and with getting different opinions and different perspectives in the world right now, that is what I would advise everyone to dio, you know, So, ah, lot of people there usedto watching CNN. They’re used to watching Fox News. They get their perspectives in their opinions, you know, from this one place. And I think that, you know, especially right now, is as you know, things were kind of, you know, getting getting a little crazy
[00:20:38] Paul Sian: up in the air,
[00:20:39] Walt Wollet: right? We need we need to All kind of, like, you know, realize that that everyone’s a person and that, you know, people are people and that we just way have to We have to do a better job working together. We have to hold our leaders accountable in this country.
[00:20:55] Paul Sian: We’re in this together basically,
[00:20:56] Walt Wollet: right, you know, And then and then that’s that’s all I That’s that’s all I would say to people is just and especially if you’re working with mortgage lenders right now, we’re all you know. We’re all stressed out and we’re swamped. And, you know, your I promise you you’re not the only client you know. So it’s like, you know, just just be patient with people. Um, you know, there’s a lot of people that that, you know, behind the scenes that work on these loans and your your loan originator eyes going to do their best for you. But a lot of times things, things happen. Unfortunately, and you know, you just need to take it as a learning experience and move forward. And I think that’s what our country needs to do with, uh, a lot of this craziness right now
[00:21:38] Paul Sian: wholeheartedly agree in the awesome advice. Thanks again for being on
[00:21:42] Walt Wollet: awesome. Thank you, Paul.
Home Buying, Debt, Relationships
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Show Summary Hey everybody, excited to have Steve Richards on the show today! Today, we are going to talk about something that we are both very passionate about and that is…
For this podcast about hard money loans I sat down with Kay Battle of Common Sense Capital Solutions. During the podcast we discussed investing in real estate, hard money lending, and how hard money loans can help investors. If you want to learn more about hard money loans and how hard money lenders operate this is a great pdocast for you.
I hope you enjoy the podcast and find it informative. Please consider sharing with those who also may benefit. Listen via YouTube: You can connect with Kay on LinkedIn. You can reach out to Kay for more information on their lending products by emailing her at firstname.lastname@example.org and check out the company website Common Sense Capital Solutions.
You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram.
About the author: The above article “Podcast #12: Hard Money Lending” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you. Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
Paul: Hello everybody, this is Paul Sian real estate agent with United real estate home connections licensed in the state of Ohio and Kentucky and with me today I have Kay battle, she’s an investor herself and she also works for a hard money lending company and is part owner.
So, we’re going talk about a about her background and hard money lending, so Kay, thank you for being on, how are you today?
Kay: I am doing great, thank you for having me call
Paul: Thank you. So, you tell us a little bit about yourself, your background, how did you get started, I guess how did you get started investing first off?
Kay: Yes, I actually mentioned I am a real estate investor, I actually started in 2008 which was right after the market crash and so I we all know there were tons of deeply discounted and foreclosed properties on the market and so I just saw an opportunity to kind of jump in low risk not, much to lose so I tried it and it worked out great and so ever since then I’ve been actively investing
Paul: Very nice, yeah that was a great time to invest, I wish I had, we had actually sold a property at that time that just wasn’t performing well and it was distance-wise us it was too far for me, you tell us how many units do you have currently?
Kay: So currently we have 35 units, they range from single families all the way up to nine units of types of properties total of 35 doors.
Paul: Okay, are they all in these Cincinnati, Cincinnati area?
Kay: Yes, we are all in Cincinnati
Paul: You are still acquiring properties, what are your strategies or goals now?
Kay: Yes, I’m currently acquiring properties and actually have a property under contract at the moment, mostly what I’m focused on now is rehab, so flips just to build up my cash reserve and then I’ll probably purchase something for holding next year.
Paul: Okay and how are you identifying your flips are you finding all in market deals off-market deals?
Kay: Well, so I use on market and wholesalers to look for off-market deals as well, so it’s a combination
Paul: Okay, yeah, this market it’s a lot on market deals are highly competitive don’t make sense
Kay: Yes very, very different from 2008
Paul: Why don’t you tell us about your company the company that you work for that’s a hard money lender what’s the name and how long have you been with them?
Kay: Yes, so as you mentioned I’m part owner of common sense capital solutions, we provide alternative funding for real estate investors and also small businesses and we’ve been in business for about a year and a half, now so I’ll start it at the beginning of 2018 and we just help people find solutions basically
Paul: Okay, so primarily you’re doing mostly hard money loans, you don’t do anything conventional?
Kay: Well, actually we do both, so I couldn’t do anything from you know months all the way up to 30-year times depending on the situation
Paul: The primary focus of this podcast is more than hard money loans not everybody’s familiar with that anybody most people are familiar with a 30-year mortgage 50-year mortgage, so tell us about a hard money loan, I mean what exactly is a hard money loan?
Kay: Yeah, the hard money loans are typically used by real estate investors who either can’t obtain conventional financing or conventional financing doesn’t make sense for the situation, so maybe they have a property that the only one I hold for a short period of time and they don’t want to be tied down to a 15-year or 30-year mortgage that might have a prepayment penalty. So, generally speaking hard many miles are short-term either they are use of bridges and to more permanent onions and or for a situation where you’re only going to hold the property for a short period.
Generally the interest rates are higher because the risk is higher or the property is going to be the loan is only going to be held for a short period of time and also in most situations the loans are interest always so you’re only paying in terms of paying a monthly interest payment, which means the principal balance isn’t decreasing, over time and so as you go to either refinance or sell the property you will still owe the full balance of whatever your loan is.
Paul: Okay, and you mentioned short term what are the I guess what’s the shortest term and we’ll see the longest terms?
Kay: Generally, you know you can go from anywhere three to three months all the way up to three years, so usually beyond three years you won’t likely see a hard money loan
Paul: Okay, presume you take into account the property itself, it’s floors can you tell us a little bit about that?
Kay: Yeah, so in general terms hard money loans are what is goods that are in accident they flown so a lot of emphasis is put on the property in the deal itself, however a lot of lenders are still going to want to get a little bit of information about the farmer so usually the credit requirements are fairly low but credit will be still taking into consideration also the person’s experience, so it can have you know a hit to your credit score heart many wells are definitely an option because there is still a lot of emphasis on the packet in the deal itself, so as long as the numbers make sense and they deal usually something can be worked out
Paul: Okay, what kind of down payment are you looking for most properties?
Kay: Down payment can range anywhere from ten to twenty-five percent, depending on the type of property in a situation, there are certain situations where a down payment may not be required, I have seen those situations as well but it’s kind of rare so it leaves plant for its investment
Paul: Somebody were to apply with your company how fast does it take you do a similar process like a pre-approval so how long would that take?
Kay: Yes, in most situations we won’t need to do like a pre-approval we’ll just go straight into underwriting, so simple for Hard money loans it doesn’t take very long to actually close, I mean it’s run situations we can close in a few days and it can go two or three weeks
Paul: Okay, so in terms of pre-approval, you’re still like we’re looking at credit somebody needs to you know they need a letter of intent from you or so that’s they could get that?
Kay: Yes, so usually we can do that whole process in a few days
Paul: Okay, all right you mentioned the example of you know having a zero down payment loan that’s pretty interesting, can you elaborate on that, what sort of examples have you seen of that?
Kay: Yeah, generally I’ve seen those and the loan amount is fairly high, so we’re looking at plus a million but usually in those situations we’re taking into account what the after repair value is going to be, so if someone is doing a large rehab project or have a construction project where they’re adding a great level of value and equity into a situation, in those types of conditions the down payment you require because we’re going to take actually count the equity that is being filled into the deal
Paul: So, that’s even equity that the person let’s say they are they’re doing sweat equity or they’ve got contractors who are going to that’s even that equity to you’re not considering already existing equity where it’s a great deal already it’s you know 50% LTV loan the value and then you also look at what they’re putting into the into the deal
Kay: Yeah, so that’s a great example so if someone has seen after repair value that’s going to be four million and they want to land fifty percent loan to value can be two million and so that’s kind of how we look at the situation
Paul: Okay, you’re also taking a primary lien position?
Kay: Correct. Yes
Paul: Okay and you mentioned we talking about two million four million or do you have any upper limits, minimum loan amounts, upper low amount?
Kay: Usually, for residential properties we’re looking at a 50k minimum, for commercial we’re looking at 100K minimum, and really the upper limit is pretty high looking at the several millions of dollars
Paul: Okay and then we you know it’s a good segue into the you’re talking about commercial residential and the in a conventional space, I mean you’ve got your commercial loans they’re quite different than your residential loans so than residential two to four units, you know do you have that distinction or it’s the same type of loan product upfront applies regardless of commercial and residential?
Kay: Generally speaking all of the month that you are still considered commercial even if you’re doing you know working with residential properties because we require that they are in an entity, and so they’re going to be loan in a business, the terms and everything are going to be very similar, the only difference is that because many I’m wrong about
Paul: Okay so you mentioned in an entity you mean like an LLC S corporations in a corporation, so that’s even another helpful thing for investors to I mean a lot of with your conventional loans, generally the conventional lenders don’t want LLC, they want you to individually on the deed but this case that’s an extra advantage for that.
Kay: Yes, exactly.
Paul: You had mentioned repayment terms we talked about interest only, I guess it’s optional on the buyer to they want to pay more if they want to pay down the principal as well, I mean are you able to you calculate that upfront or you just as they you know they get to do that however they want to do that?
Kay: It’s a case-by-case situation, we can’t look into that if there someone is interested in doing that generally most people like the interest-only payments because it helps keep the payment low while you’re in this transition phase and so you’re not having to pay additional money if you’re plenty the cells of property or if you’re playing so you’re in finance it into something that’s more than conventional most investors like to keep they’re paying it as well as possible during that time period
Paul: Okay let’s say someone does start off with the intent of you know I’m looking alone when I’m looking for a fix and flip, but then they look at the property later and you know based on the value add and they think they can get better rents are you able to refinance them into a conventional loan that you no longer term 15-year, 20-year or 30-year or how does that work with your company?
Kay: Yeah definitely, so we can do finances, we can even cash out refinance and so if someone has built equity into the property and they were planning on selling it but then they change their strategy and once they hold it, we can refinance it and let them cash that equity out and then we of course maybe purchases as well.
Paul: So, the cashing out those include 20-year loan, 30-year loan?
Kay: Yes, even up to 30-years, yes.
Paul: Okay, do you hold all the loans on your books or do you already also broker some of these loans?
Kay: So, most of your loans are going to be held by the actual lender so we broker those out an they work with the paper
Paul: How many lenders do you work with private lenders?
Kay: So, we do real estate loans and also small business loan, so total we have about 15-lender that we work with on a real estate track, I would say it’s about 15/20
Paul: Okay, very nice you mentioned small business loans here to share some information about that?
Kay: Yes, on a small business side we have a wide range of moms as well, we can do asset based loans where a company can use their invoices as collateral also inventory and equipment we can do equipment finance, we have some unsecured lines of credit for businesses and a few other things with over some general loan that we are offering.
Paul: So, talking about the loans, you mentioned interest rates are higher earlier in terms of your short term your hard money loans welcoming interest rates are we looking at there?
Kay: Generally speaking, they start in the high single digits so maybe seven and eight percent and it can go well into the teens, so twelve fourteen percent
Paul: What’s the reason for you know a low interest rate and the high interest rate, is there you know it’s based on the properties are based on the borrower?
Kay: Yeah, generally speaking it’s going to be based on leverage, so long to value also borrower experience plays a role and sometimes FICO score, not all, not in all situations but those are the key elements of determining what that interest rate is going to be.
Paul: So, you can get a loan to like it you know if I wanted to go I found a property that’s an ideal fixing flip and I can get the money to buy the property, are you also lending so I can you know pay contractors hire contractors to do repairs and if so then how is that done, how does that handle over time, do you think about all that money up front, do you draws?
Kay: Yeah, so we can find the purchase and the rehab in that situation and generally we go up to ninety percent, so we’ll do ninety percent of the total project cost which is the purchase list or we have. The purchase clients are dispersed for the seller at closing and then whatever you have to set aside for your construction or rehab will go into an escrow account and you work on a draw system, so as the worth of being included you can request a draw and get that money for that particular piece of the work
Paul: Okay, for each draw you acquiring invoices, are you requiring some sort of milestones or just?
Kay: No invoices, we just we have an inspector come out just to make sure the work is completed and don’t require that in the use you know specific contract, there’s anything like that you can do it work yourself you just want to know that the work has actually been completed and then you can have the draw
Paul: Great when it comes to the actual loan approval process, you mentioned underwriting before is there a committee, are you part of that committee or how does that work in your company?
Kay: No, I’m not part of the committee I do like a pre-assessment, so I’ll collect all of the documentation and kind of look over the deal, make sure that numbers and everything makes sense and then I submit it to the underwriting team and they actually do a full assessment, so they’ll pull the credit they’ll run the numbers and make sure that everything’s okay. In most situations we do require an appraisal so that will be ordered and generally I was saying it usually takes a couple to close everything
Paul: Okay, you mentioned appraisals and who pays for the appraisals and I guess out of their other upfront costs that the buyers should need to expect?
Kay: So, the only upfront cost generally is the appraisal and the flyer is responsible for that in most situations, there are some situations where the lender will pay for the appraisal so that’s the only thing that would need to be paid paint privates are closing. At closing for hard money loans usually they’re going to have to pay fees which are loan origination fees a point for the hard money loan, I mean those can rent anywhere from one to, I have seen it at five. So…
Paul: Five points?
Kay: Yeah, it a percentage point of whatever the loan amount is.
Paul: Okay, and the reason for the variance and the loan points do that based on risk as well too?
Kay: Well, it’s based on race it’s also based on lender and situation depending on the long sides major advantage, you are at a lower loan amount, your points are likely going to be higher versus this to add you know a million plus or like your higher loan I’m not you okay a lower percentage point but of course if you’ve going to be higher in general because the loan amount is higher.
Paul: Okay, you handle all your loans and closings or deal with the title company?
Kay: We allow the borrower to choose their title company, so they can choose whatever they want to work with
Paul: Do you service all 50-states as their in limits where you do not service?
Kay: Yes, so in most we can definitely learn in most states, there are certain situations that are a little bit more difficult one of those on the top of the head is like North Dakota, so some you know random states you have some restrictions and for the most part you can you can live in any of the states
Paul: Okay great, and how can buyers get in touch with you if they will be interested in chatting with you and finding out more about your loan products and company?
Kay: Yeah, so you can reach me at email@example.com you can visit the website which is www.cscapitalsolutions.com
Paul: Great and if you are listening to this podcaston my website, i’ll definitely provide your contact information there and leave a couple of your social media profiles too.
Again, thank you for being on our podcast and enjoy the rest to day.
Kay: Yea, thanks for having me
Paul: Thank you
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