As published in Scotsman Guide's Residential Edition, May 2011.
With the expected increase in foreclosures and distressed properties, mortgage brokers and originators face an exciting opportunity to increase their income while simultaneously helping others. With distressed single-family homes going for discount prices, whether via short sale or foreclosure sale, property investors, in particular, are benefiting. By familiarizing themselves with the nuances of investment-property financing, mortgage professionals often can find financing for investors who buy properties via short sales, thereby helping distressed homeowners avoid foreclosure.
In addition, this can build a mortgage pipeline strong enough to withstand seasonal homebuying cycles, such as the fall and winter when most mortgage brokers experience a significant decline in business. Property investors recognize that exceptional opportunities are available all year, with some of the best deals coinciding with end-of-the-year holidays. By developing an investor- focused strategy, mortgage brokers and originators can bring consistency to the business's traditionally cyclical nature.
The following four strategies can be invaluable when helping investors find financing for their property purchases:
1. Brush up on investment financing. Dedicate time and effort to learn everything that you can about investment-property financing and how it differs from financing a primary residence. Learn the required loan-to-value ratios, credit requirements, pricing tiers and maximum allowable debt-to-income ratios. Understand how underwriters view investment loan applications, and study Fannie Mae and Freddie Mac investment guidelines. Learn what leases require and the correct way to calculate investment income. In other words, become a true investment-financing expert.
2. Partner with the right Realtors. Seek partnerships with Realtors who are intimately familiar with short sales and real estate investing. Related professional designations exist for real estate professionals (see sidebar on Page 48). Express an interest in joining their professional teams. Once you have established a solid partnership, you will not only receive investment-financing referrals from them, but you will likely receive referrals for owner-occupied residential properties as well.
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