MIT 3.0: 1.2 Understanding Mortgages

MIT 3.0
1.2 Understanding Mortgages
Cheat Sheet 

Apply for one of the three mortgages listed below based on what you qualify for. If you have the documents that make up your credibility package, then apply for a conventional mortgage.

1. Conventional Mortgages

1. Seller Financing is not permitted with most residential mortgages (1 to 4 units), but if using Business Credit, season funds for two months in the bank prior to reaching out to a mortgage lender. 
2. Once you have a conventional mortgage, you may want to transfer it from your personal name to your business name. 
   • To take an investment property that’s in your personal name to your entity’s name, in order to reduce liability, complete a Quit Claim Deed Form. Sign the deed in front of a witness or two and have it notarized. However, see your local county clerk on how to perform this yourself or consider hiring an attorney to do it for you.
   • File the deed with the real estate clerk of the Superior Court in the county in which the property is located. 

2. Low Documentation

1. A Low Doc mortgage requires the mortgage to be in your business name and does not allow for owner occupancy. 
2. This type of mortgage is good for if you have limited docs and are not able to provide proof of income: 2 years of: tax returns, W2s, 1099s. Low Doc mortgages typically have higher interest rates and also require higher down payments.
3. If you previously had a mortgage of either conventional or Low Doc, then apply for a commercial mortgage.
4. Keep in mind that not every lender provides Low Doc mortgages. Private lenders typically offer it or mortgage brokers know a lender who can offer it. Plus, based upon the market, private lenders may elect to change the terms of the Low Doc mortgage or not offer it at all.

3. Commercial

1. In order to qualify for a commercial mortgage you must first have had experience with a conventional mortgage or a low doc mortgage. The range of experience varies per each lender but if you close on two to three residential properties, you may be able to qualify for a commercial (not factoring other things that help you qualify such as the performance of the property).
2. You do not have to pre-qualify for a commercial mortgage, but in order to convince a deal finder to work with you, ask your mortgage lender to send you an email that states your name and the dollar amount and interest rate that you qualify for.
3. You can use 10% Seller Financing of the loan amount with commercial mortgages, but it must be negotiated with the seller using these terms and this script.

4. Dealing With the Listing Agent and the Seller

1. Once you know you have the money to fund a deal, then contact the listing agent.
2. Download and complete the Personal Financial Statement which can be found in Module One in the Resource section of the program.
3. Model the Credibility Package also located in the Resource section of the program.
4. Contact the listing agent and request him or her to convince the seller to work with you by using the agent and seller portion of this script.
5. After contacting the listing agent, schedule a 3-way call with the agent and the seller and use the last portion of the script that details what to say to the seller.

Words of advice

• Do not disclose the origin of funds to the lender.
• If you do not have the 2-years worth of documents required, then apply for a Low Doc mortgage.
• A Quit Claim Deed, QCD, or “quitclaim”, transfers the ownership or rights of property from a ‘Grantor’ (current owner) to a ‘Grantee’ (new owner). 
• Buyer Beware: You may run the risk of having the loan called in by the bank using this method.
• For more detailed instructions on how to file the deed, the eforms link provides QCD to all 50 states, along with instructions on how to complete the form and where exactly to record it.
• If you don’t qualify for any of the mortgages listed above, then work on what’s needed to qualify, be it credit repair or private money. Whatever it is, just don’t give up and quit. 
• Based upon the market, lenders may opt to offer certain types of loans or not and have the autonomy to change the terms. So, always keep in touch with a mortgage broker to see the up-to-date loan products out there to best benefit you and your investment strategy.

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