What Corcoran Agents Need to Know About Financing (May, 2014)
Down/Flat from last month–$1MM 30 year fixed co-op loan has been moving in a range between 4 and 4.25% with zero points. (APR of 4.051 and 4.304)
4 reasons why rates have stayed lower than expected this year:
1) Inflation has remained low
2) The conflict in Ukraine has been favorable for rates.
3) Lackluster economic data- weak retail sales and industrial production
4) Expectation that the European Central Bank will start a bond purchase program similar to ours and the expected added demand for bonds will push rates down.
HOT TOPIC FINANCING QUESTIONS
Q. My seller just closed on a townhouse in Brooklyn for $350,000 and I now have a buyer for the property who is willing to pay $700,000. Will there be a problem obtaining financing given that he is quickly flipping the property? A. Yes. You should seek an all-cash buyer for this sale. There are many guidelines about flipping property within 90 days after closing on it and the investors who sell to Fannie Mae and Freddie Mac are steering clear of these deals. A flip raises many issues that can be difficult to clear up. If the new sales price is greater than 20% of the seller’s purchase price, Fannie will require an appraiser to document the renovation and repair work that has been completed in order to substantiate the increased value. In this case your seller has done minimal work. Then many questions need to be answered as to how the buyer was able to aquire the property at the significantly below market price of $350,000, whether or not there is clear title, and if the property was marketed openly and fairly. Bottom line- no lenders are interested in financing these types of deals..
Q. My client gave her W-2 income of $100,000 to a loan officer who, based on that information, sent out a preapproval that was used to enter into contract. I’ve since been informed that her tax returns reflect that she has been deducting unreimbursed employee business expenses–travel, cell phone, home office and car, thereby reducing her income by several thousand dollars. How will this potentially impact her ability to secure financing? A. A client’s annual W-2 income is typically pretty straight forward and for qualifying purposes it is usually divided by 12 to determine monthly income. However, in this case, the buyer’s income has to be reduced by $6,000 or $500 a month because of her write-offs. Five hundred dollars calculated using today’s prevailing interest rates of approximately 4.5% will support a loan of $100,000. Based on this outcome, the client’s loan will have to be reduced by $100,000, therefore, she will likely have to find more cash to put into the deal to complete the transaction.
CLOSE MORE DEALS WITH THE LATEST FINANCING TOOL
Does your client qualify for a below market rate? Thanks to the Community Reinvestment ACT (CRA) we offer below market rates for clients financing properties located in low or moderate-income census tracts as determined by the 2010 census. This includes some properties in both Manhattan and Brooklyn and, given that many clients are buying in what were considered to be “fringe” neighborhoods when the most recent census was done, it is worth taking the time to do the research. Enter the subject property of the address at the following site: http://www.ffiec.gov/Geocode/default.aspx and follow the instructions (after the first round of property information is displayed, be sure to click on Get Census Demographic for Tract Income Level).
Direct Phone: (646) 600-7171
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Direct Phone: (212) 324-3000
Licensed In: CT, FL, NJ, NY