Florida Mortgage | Loan Servicing ~ What Consumers Need to Know in this Market...

Bad economic news tops every news broadcast with big lenders like American Home Mortgage, Geneva Mortgage, Homebanc and many more completely cease all operations.  This change in the game is leaving many homeowners worried about what is going to happen to them now that their lender is KAPUT!

 Do not fret... don't worry at all... in fact, get ready to make your September payment as scheduled.  Just keep your eyes open for your letter regarding who will be servicing your loan from now on.

You see, many of the lenders that you are paying your monthly payments to are in fact only servicing your loan.  They are not holding the note, but instead they are collecting and distributing funds for the actual mortgagee - typically an institutional investor.

A lender that holds loans is called a Portfolio Lender.  Meaning that the loan is part of their investment portfolio much like we would keep stocks, bonds or a mutual fund in our retirement portfolio.  Most lenders do not portfolio loans, they sell them on the secondary market instead.

 The Secondary Market is made up of investors like Pension Funds, Insurance Companies, FNMA (Fannie Mae), and FHLMC (Freddie Mac).  These investors have contracts with lenders to service loans on their behalf.

A lender that services loans performs certain tasks for a Portfolio Lender or Institutional Investor.  These tasks are:

• Collecting Payments - the most visible function
• Collecting Escrow payments
• Maintaining appropriate Hazard Insurance - including fire, hazard, windstorm and flood
• Paying Real Estate taxes
• Collecting Private Mortgage Insurance (PMI) payments
• Paying Net Proceeds to the Investor/Lender

Other tasks that these service lenders provide that are not as evident are:

• Sending out compliance documents - like the escrow analysis forms
• Preparing Mortgage Interest Tax Deduction forms for your taxes
• Disclosing the principle and interest due and paid monthly and annually
• Dropping the Mortgage Insurance when it reaches appropriate levels
• Calculating payoff amounts upon sale

and finally... (what we're seeing so much in this market)

• Accelerating the note and foreclosing on the borrower in the event of default
• Taking title to the property and liquidating the collateral on behalf of the Investor.

So in this market when we see some big name "lenders" going under, many times they are not the ultimate mortgagee... but instead the servicing entity.  Despite the servicing entity's demise, the investor will have another lender contracted out very quickly so they do not lose the revenues.

Unfortunately, there is little or no transparency in this area of the lending industry to show you who you ultimately owe your money to...

So... as I mentioned before... be ready for your next month's payment.  It will be due to someone even if your "lender" shut its doors. 

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Florida Mortgage Loans | Condo-Hotel/Condotel Rental Income Rules

Condo Hotels or Condotels continue to grow in popularity in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa, Bonita Springs and Miami.  Because of this, it is important to keep in mind what Lenders are requiring in their lending guidelines concerning this unique property type.

One major issue that comes up with Condo Hotels is the rental pool.  Part of the allure of the property is the ability to allow the hotel to rent the room out to guests while it is not being used by the owner.

Unfortunately, Lenders require that the rental pool be voluntary.  Involuntary rental pools are to be classified as Timeshares. 

What this means is that when the owner of the Condotel unit wants to rent out their unit, they must make sure they put the unit into the rental pool... it isn't automatically rented without their say so. 

Considering issues like seasonality, major local events, and discount room rates/sales, there is no valid way to forecast the actual income that will be shared by the hotel and the room owner. 

An owner that does not want to rent their Condo Hotel room at all has that option under a voluntary rental pool.   While this might bother some hotel operations that want the room to rent, this is the only way that financing can be obtained.

The voluntary rental pool also affects the potential net income.  A buyer cannot be promised $10,000 a year return on a property if they are only going to make it available for 6 months out of the years or only on weekdays.

Realtors (listing agents) and Developers are therefore strictly prohibited from advertising rates of return, cap rates or even offering investment advice concerning Condotels.  Any potential rate of return could only be hypothetically based on an assumed usage rate that may never be reached.

Because of this, any rental income will not be counted as part of the qualification income for the Condo Hotel Loan.  To the borrower, this means that their debt to income ratios will not benefit from any potential cash flows from the property. 

Given this information, it is prudent that Realtors and Mortgage Brokers advise their clients who are interested in purchasing Condo Hotel properties that they will need to be able to qualify for this purchase on its own with all their other current debt. 

If they are unable to meet the Lenders' Debt to Income Ratios with their current debts and current primary residence, then they will likely not qualify for a Condo Hotel Loan.

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Florida Mortgage | Fixed Rate or ARM ~ the decision depends on YOU

Fixed Rate Mortgages (FRM) versus Adjustable Rate Mortgages (ARMs) is a hot topic of debate right now. There is a camp of Fixed Rate evangelists that want to force-convert all mortgagors into their fold... all-the-while the ARM holders are scared by the news of impending doom sung from the rafters by Journalists and FRM propaganda.

So now YOU want to buy a house or refinance your loan and you're getting drawn and quartered by your "trusted advisors" about whether you should get a Fixed Rate Mortgage or an Adjustable Rate Mortgage (ARM).

Different people swear by different financial philosophies... the problem is they are DIFFERENT FROM YOU. The only person that knows your financial situation is YOU. The only other person who can help you decide which loan program fits you best is your Mortgage Broker.

Your Mortgage Broker will understand the nuances of your unique financial situation and will help you decide on a loan program based on your needs and preferences TODAY as well as help you plan for the future.

The information you give to your Mortgage Broker will all filter down through his/her consultative funnel and allow them to offer you two to three loan programs to choose from as well as the features and benefits of each program for you.

There are several criteria that are weighed to make the decision. A few of them are as follows:

• Your life stage
• Your career stage
• Your income and future potential
• Your family stage
• Your stability
• Your property needs

A good way to show how the decision process works is via the table below.

	Fresh out of college Just got first great job Family recommends buying not renting Single 600sq ft - 1br - Condo Down Payment Assistance from Parents
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Likely won't be in small condo long New job = money is tight Interest Only option helps reduce Monthly expenses No real need to "build" Equity Low cost of property means low appreciation Really this is just a step above renting
	3 years later Promotion at work Engaged - two incomes Need more space 1000 sq - 3br - Townhouse
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Double Income but increase in expenses Nice but small profit on other property Further from work means cost of commute Interest Only option frees up monies to repay fiance's student loans Interest Only frees up monies to pay off credit cards
	Married Husband gets promotion New Baby Refinance for Renovation of Nursery
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage More babies in the future Space is already tight Cash is tighter Cash out with Interest Only Exit Strategy - 2 yrs Max
	Dad now Middle Management Second child First child in private school New Dog - Need a Yard Need a 5 bedroom
Fixed Rate Mortgage Secure - Rate is good for 30yrs Longer period in Home "Family Home" Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option
	Son headed away to College Daughter in Private School Mom going back to work Refinance to renovate home office Some of Cash Out used to buy 4-plex on campus for son and friends
Fixed Rate Mortgage 10yr Interest Only expires soon Double Income Investments Up Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only Primary Residence	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option 4-plex purchased with Cash Flow ARM... increased monthly returns Investment
	Both Kids in college / Empty Nest Mom's career is taking off Dad has promotion Buying Vacation home in South Florida Buying Investment Property as well
Fixed Rate Mortgage Secure - Rate is good for 30yrs Appreciation = good equity position Investments well stocked Not sure if/when full time move to Florida Cash out of this property to buy 2nd Home another 30yr w/10 IO? - could go either way Primary Residence	Adjustable Rate Mortgage Likely won't be in House for 10 years Wintering in South Florida is great! Many friends already full time Florida residents 4plex in 1031 for 20plex Retail Strip Center Purchased where Mom's office resides 20plex bought with OptionARM Strip Center 5/1 ARM Investments
	Retirement Full time residents in Boca Raton Living on investments Sold home Up East Enjoying grandkids' visits
Fixed Rate Mortgage Timeline unknown on Primary Using monies from sale of other home to add on to retirement funds Great Ranch House in Gated Community Ability to travel Can always refinance if need for equity HELOC in place for emergencies Another 30yr Fixed with 10yr Interest Only Primary Residence	Adjustable Rate Mortgage Investment Properties 1031 Exchanged for more Properties Large Portfolio of investment properties growing Future Cash Out Refis fund purchases Cash flow establishing further income for retirement Investments restructured into LLCs to put in trust for kids/grandkids Investments

___________________________________________________

As you can see, the borrowers' unique needs changed throughout the different lifecycles that they experienced. From just starting out in a job to getting engaged and needing to pay down accumulated debt to having kids that eventually went off to school to retirement...

Even investing in rental properties posed a dilemma about which way to go - Fixed Rate or ARM.

The consensus wants to say that since there are so many Winner icons in the Fixed Rate column, that it is obviously the winner by majority rules. The problem with that philosophy is that in any case shown above, if the timeline varied just slightly, the ARM might have come back in favor.

If an ARM had been chosen over a Fixed Rate Mortgage then the timeline had run longer than expected then Mr and Mrs. Borrower would have had to refinance ahead of schedule. Although, this isn't the worst problem they could have - it could speed up their timetable for investing in other properties or other investment vehicles.

The truth is that it is hard to predict change. The best that can be done for these borrowers is to sit down and consult on:

• Where they are
• Where they are going
• What is their entry strategy for the property
• What is their exit strategy

The best mortgage vehicle is whichever plan that will give them some security to make sure that their personal and financial lives are not burdened - but instead enhanced by their Mortgage.

When this occurs, their mortgage actually becomes a tool for their:

• wealth accumulation
• debt elimination
• college planning
• Investment strategy
• future retirement incomes

The choice between the Fixed Rate Mortgage and the Adjustable Rate Mortgage is ultimately up to the borrower. The Mortgage Broker can only advise... but a good mortgage broker can show that there are definite advantages to both programs for all borrowers.

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Florida Mortgage | Land Surveying Primer ~ Why you should order a survey every time!

ARE YOU BUYING A HOME OR AN ENCROACHMENT??

A Land Surveying Primer

Ok... I am a little biased right now. I grew up in a Real Estate Industry Family...specifically my parents own a Land Surveying Company.

• I remember at 11-12 years old going in and doing tax book research and answering phones...yes I was a master of microfiche then!
• I remember at 14-15 going to the courthouse and looking up deeds and plat maps.
• I remember at 16-17 following the field crew around and watching and helping them spot houses
• I remember at 17-18 after drafting and architecture classes at High School drawing the mortgage inspections (the simpler ones)...

I remember driving out and doing Mortgage Inspections... spotting boundaries, driveways, decks... anything that may have been added either after construction or since the last sale.

Why am I relating this to you??

Because... the mortgage industry has become cheap!

Everyone is worried about closing costs and interior inspections... but who is making sure that you are not buying a property with an encroachment?

Who is making sure that you're buying a home without a huge easement?

No one!!!

Why?? Because lenders are not requiring mortgage inspections... much less full surveys, or pins.

• Mortgage Inspections are rudimentary checks of the house to make sure that whoever built on the land colored within the lines.
• Surveys actually find benchmarks, setbacks, landmarks, centerlines and easements and detail them on paper...they are of legal record if recorded.
• A Staked Survey is when the crew marks the corners with wooden stakes or flags. They are temporary but are important for construction.
• Pins is when the surveying crew does a survey and then puts iron rods, usually capped with an orange plastic cap with the surveyor's initials and license number. These are "permanent".
• Plat... the drawing to the left is a "plat map" ... it shows all the dimensions and directions of a property including where the house sits. Note the dotted lines, those are set backs. Transits, GPS and Triangulation are used to find these dimensions and their latitudes and longitudes.

The biggest issue that arises from not ordering at least a mortgage inspection is border disputes!

What a survey or mortgage inspection helps to prove is whether your neighbor has a deck or driveway on your property and whether the area you wish to expand upon is buildable land!

If you purchase a piece of property and the neighbor has his driveway over the lot line, you can request that he move it.

If he cannot, you have to do a "sell-off" of that portion of the land to the neighbor - which leaves you with an irregular lot and some deed restrictions will not allow you to have a smaller lot than you already have ... this requires rezoning!

You can also create an easement... a legal pass-through allowing your neighbor to use that part of your property. The easement will be written for a number of years and for one specific use.

My community is Zero-Lot-Line... because of this, the Eastern boundary of my lot abuts my neighbor's house. Well... the roof line hangs over my lot so there is a legal "Overhang Easement" drawn onto my property allowing the neighbor to have his roof and a satellite dish overhanging but not attached to my property.

An easement can also be created to provide access to a lot behind another parcel that has no direct road access... and the driveway created would be the responsibility of the property owner to maintain not the person behind them.

Easements can also be for Utilities, Sewers, Phone, Roadways, access, etc...

Because of the complicated nature of land - raw or unimproved - it is up to us - the Real Estate professionals - to encourage the use of Land Surveying techniques. It is up to us to step forward and head off the purchase of land without an inspection of the parcel because then we can ensure a smoother transaction and a peaceful existence for our clients on their properties for the entire term of ownership.

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Florida Mortgage | Foreign National Homebuyers: How to get your Loan Started!

Florida is a HOT market for Foreign National's to purchase both Second Homes and Investment Properties. This is a great time and a great market for their purchases. With the weak dollar and the strong Euro and British Sterling, European investment in Florida is at an all time high!

A Foreign National Loan is a very simple process if you have your documentation in place. Here is a great checklist to use when you want to get the ball rolling on that process.

Documents needed for a Foreign National Loan Program:

1) Three Personal Reference Letters from Country of Origin. Letter must be from a lending institution and include the following:

• Credit was extended to the Borrower
• Borrower is in Good Standing
• High Balance
• Current Balance
• Payment Amount
• Payment History

2) Two Months' Bank Statements from a US Based Bank.

3) Employment Verification Must Include the Following:

• Must be on company letterhead from Country of Origin.
• Must state Income for for prior 2 years and current income.
• Length of Employment
• Position of Borrower
• Type of Business

For Self Employed Borrowers, please include:

• Percentage of Ownership in company
• Address of business for the past 2 years.

4) Copy of Visa (if applicable)

5) Copy of Passport

All letters must be translated into English by a certified translator.

For more information about Foreign National Loans, please check the following links:

• Florida Mortgage | Foreign National Homebuyers - Visa Waiver Program
• Florida Mortgage | Foreign National Homebuyers - "Dollar weakens on Subprime Woes" is good news for you!
• Florida Mortgage Loans | Foreign National Homebuyers: Seasoning Funds in US Banks
• Florida Mortgage | Foreign National Homebuyers: Europe has come calling!

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Florida Mortgage | Foreign National Homebuyers - Visa Waiver Program

When applying for a Foreign National Loan in the United States, a Foreign National Borrower must provide a copy of a valid passport and Visitor Visa for the lender to verify the eligibility of the borrower.

The Visa Waiver Program is available to residents of certain countries to come to the United States and stay for a period of no longer than 90 days without obtaining a visa.  These Foreign Nationals can come for either Tourism or Business reasons... Business or Pleasure.

Currently there are twenty seven (27) countries who qualify for the Visa Waiver Program.  They are:

Andorra	Iceland	Norway
Australia	Ireland	Portugal
Austria	Italy	San Marino
Belgium	Japan	Singapore
Brunei	Liechtenstein	Slovenia
Denmark	Luxembourg	Spain
Finland	Monaco	Sweden
France	the Netherlands	Switzerland
Germany	New Zealand	United Kingdom

In order for a Foreign National that qualifies for the Visa Waiver Program to obtain a Mortgage on a Second Home or Investment Real Estate, the Foreign National Borrower will need to obtain a letter certifying their Visa Waiver Program status from the nearest US Embassy or Consulate.

Foreign Nationals using the Visa Waiver Program as opposed to obtaining a full Visitor Visa will likely have trouble qualifying for a property as a primary residence, therefore only a Second Home or Investment Property mortgage program will work for these borrowers.

For more information on the Visa Waiver Program choose one of the links below:

• Department of Homeland Security   Customs & Border Protection   website.
• Visa Waiver Program Traveler Guide

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Florida Mortgage Loans | Equity Line for Hurricane Preparedness

Hurricane Season is upon us once again in South Florida.  People are checking their rations, stocking up on bottles of water, vital medicines and cans of tuna, buying batteries by the case and trying to meet the Hurricane VIP - the neighborhood roofer!  All the while they are forgetting to have ready CASH in an emergency - cash that could come from a Home Equity Line of Credit (aka HELOC).

The HELOC is a life preserver when there is a sea of people out there all clamoring to get their home repairs done.   Having ready access to cash is essential to quick repairs.  Many contractors will be very busy and turn away business if they have to offer financing.

When a homeowner does not have cash available, we see the all-too-familiar blue tarps for months until finances catch up to repair costs...

...and when there are major repairs to do, it may be hard to get financing!   A lender may not write a loan on a property in need of hurricane repairs

A Home Equity Line can solve this issue which is why I recommend one to all of my clients.

Advantages of having a Home Equity Line

Low Cost

• There are typically two options, the Low Cost Home Equity Line and the No Cost Home Equity Line.  Both have their advantages but neither will have anywhere near the closing costs associated with a Conventional Mortgage

Interest Only

• The payment is low because it is an Interest Only payment.  This helps the borrower afford the payments when cash is tight.

Easy access to funds

• A HELOC will have a checkbook associated with it and often even a credit card.  These checks and cards draw money from the line rather than a checking account.  This gives the borrower 24/7 access to their money.

Tax deductible

• The repairs are always deductible when a state of emergency is issued.  The IRS has a box to insert the repair costs due to a Hurricane.  The interest paid may qualify for mortgage interest deduction as it is technically being used for home improvement.  Consult with your tax professional to make sure.

Easy Processing

• Typically the Home Equity Line is an easier program to process with less time needed. 

Loan Amount

• The HELOC can go as high as 95% Loan to Value in many cases.  I prefer to see a 90% Loan to Value which leaves some equity in the home to pay for expenses in the case that the borrower needs to sell the property in the next few years.

You can evacuate

• FEMA guidelines are pretty strict.  If you were able to evacuate and did not stay in the home or a FEMA shelter, then you will likely be denied assistance.

 

Caveats to Home Equity Lines!

No discussion of mortgages could be complete without the pitfalls!

• The HELOC payment will be in addition to the current mortgage payment on the property so you will need to qualify for the combined payment.
  
• Using up too much your Home Equity can flip you upside down should the market drop.
  
• Almost all HELOC's have some sort of prepayment penalty.  It is usually small but there nonetheless.
  
• Home Equity Lines are Prime-Based Loans.  That means that the interest rate on the loan will be determined by what the Prime Rate is at the time.  Prime is currently 8.25%.  There are teaser rates offered by many banks but make sure to read the fine print!
  
• HELOCs are Adjustable Rate Mortgages and will adjust as Prime Adjusts.  There are loans that are fixed as well.  You should ask about fixing the rate as an option if possible.
  
• HELOCs are not ATMs.  The money should be used for home improvement or debt consolidation and should be budgetted carefully.

Don't wait until it is too late.  Consult with your Florida Mortgage Professional today to talk about your options before the storm is in the box!

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David A. Podgursky, MBA
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Florida Mortgage Loans | Reverse Mortgages - are they all hype??

There have been many new commercials on TV with trusted actors/spokespeople who are adamant that the Senior Citizen public needs access to the equity in their homes via a Reverse Mortgage.  The commercials discuss Peace of Mind, Security, and Quality of Life.  What they do not discuss is the downsides to such a program in the short and long terms.

Note: This post is meant for debate as much as for informative purposes and I am sure it will ruffle some feathers... but it is better to ruffle those feathers now before more people choose to go down a path that they were sold on despite the fact that it may not fit their true needs.

There are very pronounced limits to the Reverse Mortgage that are not always outlined in advertisements or even by the Loan Originators that pitch these loans. 

I will start with the positives of this loan to show how it can help.

1. There is no problem with credit histories.  In fact, this is a good program to use in the situation when the homeowner has bad credit as opposed to using a hard money loan. 
   
   
2. Not determined by ability to repay
   
   
3. The borrower can stay in the property indefinitely.
   
   
4. This is a negative amortization loan but the borrower will never owe more than fair market value on the property if all the equity is lost to negative amortization.
   
   
5. Funds can be used in any way
   
   
6. Manufactured homes do qualify
   
   
7. Three options to receive funds: Annuity, Line of Credit or Lump Sum. 
   

Here are some of the negatives to ponder:

1. HIGH Interest Rates.   While the "Interest Rate" itself seems in line, the true accumulation of Negative Amortization is based on the TALC - Total Accumulated Loan Costs.  These costs can create an effective interest rate of 9.5% or more.  When appreciation in the property is low, the 9.5% negative amortization eats equity at a very fast rate.
   
   
2. The minimum age for qualifying for a Reverse Mortgage is 62 in the State of Florida.
   
   
3. At age 62, a borrower can only access roughly 40% of the value of the home.
   
   
4. The loan to value of this program is calculated based on a determination of approximately how long the borrower will remain in the property... i.e. a mortality calculation
   
   
5. Once a borrower takes out a Reverse Mortgage, they can never do it again.  The Reverse Mortgage cannot be refinanced.  If a need for more money arises, there is no way to get additional funds from the mortgage.
   
   
6. Having more than $2,000 in a savings account for an individual or $3,000 for a couple prohibits the borrowers from qualifying for Medicaid in the event of a medical emergency or catastrophic illness.
   
   
7. Residency is required.  The Reverse Mortgage requires that the borrower stay in the property.  An absence of more than 30 days will allow the lender to seek foreclosure. 
   
   This is especially important in Florida.  This means that snowbirds will have to make the reverse mortgaged home their primary/homestead and stay here full time.  This also means that a prolonged stay out of the property - i.e. to help with taking care of a new grandchild, to help in rehabilitation of a loved one, to seek treatment of the borrowers themselves, to travel - are all absences that can trigger default.
   
   
8. The Negative Amortization of this loan means that the house that Mom and Dad spent so much time and money building and paying off may belong 100% to the bank instead of having any value that can be left to their heirs.  In the case that the loan amount is 100% of the value of the property, the heirs still must dispose of the property or refinance it or they or the estate could be liable for the foreclosure. 

Now, while AARP and HUD both endorse this program for Seniors, AARP recommends and HUD requires at least two counseling sessions to make sure the borrowers know the positives AND the negatives of this program.  Both groups understand the potential damage that this loan program could cause and want to be sure that Seniors receive full disclosure.

My personal and professional opinion is that there are situations where the reverse mortgages do fit.  I think that some homeowners have certain goals which can be achieved through a reverse mortgage.  I think that it definitely fits a niche market.

That being said, I do not believe it is meant to work for the masses.  I believe it truthfully does not fit MOST potential borrowers.

If a borrower has:

• good credit,
• some income by which they can repay a mortgage,
• adequate equity,
• minimal debt,
• controlled expenses,
• affordable lifestyle,
• the need to continue growing wealth during retirement,
• the desire to leave an inheritance to their family/friends,

then I believe that a Conventional Mortgage - a "Forward" mortgage - and proper use of secure, liquid investments can offer the borrower more security and definitely more money over a longer period of time than a Reverse Mortgage.

With a cash out refinance and funding an annuity that can not-only pay or help pay the mortgage payments but can accrue interest to allow the borrowers to have a documented income, a Conventional Mortgage can create a better financial plan for future needs and emergency funds.

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Mortgage Loans | Pre-Approval vs Pre-Qualification - a lesson in industry semantics

When buying a home, it is very important to be Pre-Approved for your mortgage in advance. The reasons for this vary from calculating affordability to presenting a stronger contract. The issue is that the definition of this Pre-Approval varies depending on the context in which it is used. This guide should help you understand what Sellers are asking for when they advertised "Pre-Approved Buyers Only".

The phrase "Pre-Approved" brings up a question of semantics. The best way to further this discussion is to define the terms Pre-Qualification and Pre-Approval.

Pre-Qualification is a process whereby the buyer's income, credit and assets are analyzed. There are several factors that are measured which are important to lenders when they are underwriting your file. They are:

• Affordability - How much property you can afford?
• Credit Score and History - Have you paid your past debts?
• Ability to Repay - Debt Ratios = expenses / income
• History of Savings - Do you overspend every month?
• Stability of Income - Has your pay dropped or spiked this year?
• Stability of Employment - How long at your current job?
• Availability of Down Payment - How much can you put down?
• Adequate Reserves - Can you afford the mortgage without income for a certain amount of time? Can you afford to close?

It is essential that all of these factors are weighed to give you a legitimate chance of getting the loan approved.

The findings in the Pre-Qualification will also help you and your Realtor decide the home prices to search in the MLS. This prevents falling in love with a house just to find up that is $50,000 out of your price range.

Pre-Approval is a step PAST what you see above. It is actually only available after your complete loan file is submitted to a lender. The additional steps required to come up with a Pre-Approval are:

• Signing of Loan Application
• Collection of Bank and Asset Account Statements
• Collection of Tax forms and 1009s / W-2s
• Verification of Employment
• Verification of Business Owned if Self Employed
• Submission of all documents to Lender

At this point the lender will underwrite the loan file and come back with a Conditional Approval - a.k.a. a Pre-Approval. This is only a Conditional Approval because there will be conditions that the lender places on the loan that must be met prior to closing. These conditions will be:

• Receipt of satisfactory, fully executed sales contract
• Appraisal meeting or exceeding value of house
• Re-pull of credit if it takes longer than 30 days
• Updating of all bank statements and asset accounts

After these documents are reviewed and signed off on by the Underwriter, the loan should have Final Approval or Commitment and be Cleared to Close.

A Pre-Qualification is therefore very important. It is not a guarantee, though!

As you can see by the two descriptions, the Pre-Qualification is just a necessary step by the Realtor and Mortgage Originator in the homebuying process. It helps determine how much house a buyer can afford. It also helps outline how much of a payment the buyer can handle based on real numbers like income, savings, expenses and credit scores.

"Pre-Approved Buyers Only"

When trying to satisfy this Seller requirement, a buyer should realize that the difference in a Letter of Pre-Qualification and a Letter of Pre-Approval is much more than just semantics. It can take between a few days and a couple of weeks to get a pre-approval. It all depends on the particulars of the loan file and the lender itself. This is why it is important to get started on the loan application before shopping for the property

A Letter of Pre-Qualification should only detail that a buyer appears able to purchase a home at a particular price point based on the information they provided. The caveat to a letter of Pre-Qualification is that it should always say that it is not a commitment or promise of one in the future but instead a judgement based on the experience of the parties involved.

A Letter of Pre-Approval is the document that is actually prescribed by Realtors and desired by Sellers. This is proof that the lender has already approved the buyer for a loan and is just waiting on a property to put with the loan. This is the "Golden Ticket" that you will need need to have in hand to successfully move along the path to homeownership.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Mortgage Loans | Foreign National Homebuyers: Seasoning Funds in US Banks

Foreign National Homebuyers typically purchase properties both Second Homes and Investment Properties in Vacation and Resort areas.

With the Florida real estate market being on a downswing but still chock full of new development, Foreign Nationals are finding now to be a great time to purchase their vacation homes in Florida. The weak dollar versus the Euro and British Pound makes this a great time for Europeans!

During the purchase transaction, most lenders require funds equivalent to closing costs plus six (6) to twelve (12) months of PITI (Principle Interest Taxes and Insurance) payments to be placed in a US bank account. The lender will require verification of the deposits for loan approval.

Based on the findings of some of my Realtor partners, some small local banks have some issues accepting and translating or exchanging checks from International Accounts.

To get around this hurdle, I suggest to Foreign Nationals that they choose to start an account in their home country with a large international bank, preferably with branches in the area near where they want to purchase.

Several banks come to mind that have International branches such as:

• Deutche Bank
  
• HSBC
  
• Citibank

When the Foreign National is in the loan process, monies can easily be transferred and verified at these banks. They may even create US based accounts for automatic monthly payment options.

High Net Worth Clients can also use the Private Wealth Management departments of these three International banks to get their accounts set up and verified.

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Read more about Foreign National Mortgage Planning in my previous posts:

• Florida Mortgage Foreign National Homebuyers: How to get your Loan Started!
• Florida Mortgage Foreign National Homebuyers: Europe has come calling!

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Mortgage Loans | Condo-Hotel/Condotel Financing Explained

Condo Hotels or Condotels are a popular property type in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa and Miami. With access to beaches, golf and other tourist attractions, Condo Hotel properties are a great way to purchase a vacation home with the benefits of ownership and the conveniences and amenities of a hotel room.

Condo Hotels have recently become more accepted by lenders who are now offering loans with as little as 10% down. Residency in these units is typically taken as either a Second/Vacation Home or an Investment for loan purposes. Some Lenders allow limited Primary Residence loans on these properties.

Foreign Nationals are common investors into these units in Florida as they typically purchase in vacation/resort areas.

A favorite feature of Condo Hotels for their owners is the rental pool and built in management. While not in use, the hotel can rent the units out and maintain them with housekeeping services on a nightly, weekly or monthly rental. While the rents will not count towards mortgage qualifications, this is a perk of ownership that most people do not overlook.

Lenders often look for specific criteria to be met such as:

• Minimum of 600 square feet
• In proximity to vacation/resort area
• Separate Kitchen Space, Bathroom and Living Area/Bedroom
• Kitchen to be equipped for food preparation
• Voluntary rental pools

Some Examples of some great South Florida Condo Hotels are:

The Brazilian Court in Palm Beach Florida just off world renown Worth Avenue shopping. This is a quaint historic building complete with the five-star hotel amenities you would expect to find on Palm Beach Island including an amazing spa and a gourmet restaurant owned by five-star Chef Daniel Boulud.

Trump Las Olas Beach Resort - a 12 story Condo Hotel Project with 95 residences in a boutique setting set in the exciting Las Olas area of downtown Fort Lauderdale Florida. Located on a barrier island, on Sea Breeze Blvd between the Atlantic Ocean and the Intracoastal Waterways.

Trump International Sonesta Beach Resort - Part of the Trump Grande project in Sunny Isles Beach, Florida, this project is a three phase project includes the condo hotel project designed by renowned Sieger Suarez Architectural Partnership.

Ocean Sands Resort and Spa - In Pompano Beach Florida, just South of Boca Raton, Florida. A great location with over 852 feet of beach frontage.

The Ritz-Carlton Golf Club & Spa - Located in Jupiter Florida, in the North part of Palm Beach County Florida, this property offers a members-only spa and a Jack Nicklaus Signature Golf Course. The floorplans offered are 2 & 4 bedroom Mediterranean Styled Club Homes.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update: Investor and Commercial Worries

The release of the newest version of the proposed Florida Property Tax Reform should worry a large portion of property owners in the State.

While Florida House Speaker Mark Rubio and Governor Charlie Crist have done a reasonable job accommodating homestead property owners, i.e. full time residents, especially those with property values under $500,000, I feel that there was a failure in this newest revision of the property tax reform to adequately address the issues facing investors and commercial property owners.

Many feel that these people don't need as much attention but I think that the ripple effect of not helping with their tax woes will be felt more directly than Florida Legislators might realize.

Apartment Investors

These investors will have the ugly job of informing their tenants that all this news about how tax savings will pass to them is just not the case.  As property taxes will only lower slightly, and not at all in some cases, Rents will have to remain high to ensure that the properties cash-flow for the investor. The onus of the currently high tax rates on commercial properties will still fall on the pocketbooks of the renters. 

Strip Center & Industrial Park Owners

These Investors are usually using Triple-Net (NNN) Leases which involve CAM (Common Area Maintenance) charges.  The CAM usually includes Maintenance, Taxes, Insurance and other common fees.  This benefits the investor in that they know they are collecting these fees from their tenants...but high inventory and vacancy rates will suffer as CAMs will not be able to be lowered without a true overhaul of the tax codes.

Condo Owners

This is a broad range of property owners but mainly consisting of small and medium businesses.  These businesses are suffering from a double dose of the tax reform blues as they see a much less aggressive tax plan on their homes AND their work places.

Shopping Center Owners

Malls and shopping centers have very high per square foot rents right now plus CAM and sometimes Gross Leases to factor in.  Due to high taxes, some small businesses are settling for lesser centers because of the high cost of doing business in newer Shopping Centers.  Therefore large shopping center owners are seeing higher turnover rates and are now having to offer more incentives to potential tenants. 

Land Owners

Some property owners lease their land instead of selling it or constructing on it themselves.  Fast Food Chains are a popular target for this type of property owner.  They buy the land and lease it to the franchisee who erects the building on it and stays for a certain period.   With high taxes, this is creating a burden on property owners in higher traffic areas as they are the most affected due to higher property values.

A potential fix...

Some of these problems could be addressed by a proposition which was not offered up in the most recent coverage was a change in Assessment practices.  If properties were consistently assessed with the same method and with an As-Used mentality rather than with a Potential Usage mentality, a small commercial property owner would not have as much to fear when the property appraiser comes to reassess after a new record was set for a price of another property down the street. 

Comparables of properties of different Zonings, Usages, and Types should not be weighed in the judgment of an entirely different property.  This is the problem with the Palm Beach County Property Appraiser who prefers to base assessments on Potential use regardless of the fact that a property might have been used in the same way for fifty years and has no reason to believe it will change.

The worst part...

There are definitely more property owners that will not feel the overdue relief promised by Legislators... but what these lawmakers are not seeing is that the indirect effect of high taxes on commercial properties on the middle and lower class is felt when employers cannot afford to create more jobs or offer higher wages... when apartment owners cannot afford to reduce rents... and when small businesses just cannot expand due to ultra high costs making financing property impossible.

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David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Second Homes - What are they??: Lending Information from The Mortgage Go To Guy!

What makes a Second home a 2nd Home?

• That it came in 2nd Chronologically in the purchasing order?
  Well... semantically YES... technically NO
• That it isn't where you live??
  Well... technically YES ... Semantically NO

So we're fighting Technicalities and Semantics now, eh?

Why do I ask these tough questions?? Because - we Real Estate Professionals in South Florida are surrounded by Second Homes and sometimes the people that own them! Why sometimes? Well... they're called Seasonal because they're here for "Season"... Get it?

No?? People have different measures of season depending on the demographic... suffice it to say, Season here in South Florida is roughly September to April....sometimes more sometimes less - depending on the weather.

We call these people Seasonals or SNOWBIRDS.

In Charlevoix, Michigan, they call people with 2nd homes there FUDGIES. They claim that the out of towners only come for the fudge. Let me tell you this about Charlevoix's TOWNIES... they overestimate their fudge producers and underestimate the beauty of their Lakes, Sunsets and Stargazing places!

What are other names for 2nd Homes?

• Weekend Homes
• Weekend Retreats
• Summer Cabin
• Winter Getaway
• House in the Hamptons
• House on the Shore
• Cottage in Maine
• Ski Lodge in Aspen
• Beach House

From a Lending standpoint - these names all have some commonalities that help us classify them as Second Homes and NOT Primary Homes or Investment Properties. Can you pick them out?

1. First of all... notice LOCATION LOCATION LOCATION. Typically a Second Home is considered to be Fifty (50) Miles or further from your Primary Residence. So the person in Long Island that buys a Condo in Boynton Beach is further than 50 miles from their Primary during Season eh?
2. Second of all... Notice Ski Lodge, Hamptons, Getaway, Beach... Those are descriptives that help qualify the property as SIGNIFICANTLY SUPERIOR. What? That 700 square foot hotel room that we bought in South Beach Miami is superior to our 5000 square foot Highland Park, IL house on Vine?... well...Superior means something different... it means BEACH. It means Room Service... it means maid service. Sure, you may have a chef and maid on the payroll but BEACH is locationally superior to Suburb! It doesn't even matter that the square footage or even amenities are less if it if a VACATION home the location makes it Superior.
3. Third of all... and this is the tricky one... it isn't an investment property!!! What?! I can't Rent it? well... that's where things get grey. Can you rent it is what plagues the equation. The answer is technically NO. Could you let people pay you for staying there for a week or so at a time... well... that really depends on the deed restrictions and how many weeks you actually live there versus rent it out. Technically renting it makes it an investment property.
4. Fourth... you're really committed to the property being a place that you will use for part of the year and set it up to use it like a second residence. If you buy it and someone else furnishes it for their use - not yours then it isn't right. Now, Condotels come furnished all the time... and some houses do and that's OK. Condotels are pretty much known to be partial year rentals anyway. This is hard to qualify but intent is intent.

What kind of snake oil and I selling?? Well... the type that will hopefully shed some light on this property type for Realtors and mortgage brokers and consumers!! Why? Because it is a

GREAT TIME TO BUY SECOND HOMES IN SOUTH FLORIDA!

Eh?? What's that??

• Rates are LOW!
• Market is DOWN!
• Plenty of Inventory to Choose from!
• Your Baby Boomer friends are already looking! (gotta keep up with the Joneses)
• Hurricanes are a figment of your imagination (riiiiight)
• You've got that money sitting in your house as equity and it isn't doing ANYTHING for you. (and won't do anything for you stuck in the house!)
• The dollar $$ is still weak to the British Pound and Euro (i.e. buy now, enjoy, when the dollar comes up and the market does your dollars appreciate as does your property!)
• Latin American investors are looking HARD at South Florida again!
• UPDATE: I forgot to mention - check with your CPA - most of them claim that you can deduct the Mortgage interest on a 2nd home - so long as you finance it within 90 days of purchase!
  

Look No Further than South Florida for a great 2nd Home Value!

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David A. Podgursky, MBA

The Mortgage Go To Guy!

Your Source for Residential and Commercial Mortgage Loans in Florida