Category: Mortgage Tips

Creative Solutions for Doctors with Negative Savings to Acquire Homes with Minimal Down Payments

Considering the Doctor Loans Program by Blake Mortgage. Would this be the answer for physicians with negative savings?

The dream of owning a home may seem out of reach for doctors with negative savings due to hefty student loans and other financial obligations. However, several creative solutions can help these professionals achieve homeownership, even with minimal or no down payment. This article will explore a few strategies doctors can consider to make their home-buying aspirations a reality.

1. Physician Home Loans: 

Physician home loans, or doctor loans, are specialized mortgage programs explicitly designed for medical professionals. These loans are offered by certain lenders who understand the financial challenges doctors face, including negative savings resulting from extensive education and training. Physician home loans often require little to no down payment and have more flexible underwriting criteria, taking into account future earning potential. By leveraging this type of loan, doctors can overcome their negative savings and purchase a home with minimal upfront costs.

• Partnering with Medical Organizations:

  Another potential option for doctors with negative savings is to explore partnerships with medical organizations or hospitals. Some medical institutions provide housing benefits or assistance to their employees, especially those in high-demand specialties. These benefits may include low-cost housing, subsidized rent, or down payment assistance. By taking advantage of such opportunities, doctors can secure affordable housing options while minimizing upfront costs. It is worth reaching out to the human resources departments of medical organizations or hospitals to explore these housing benefits and determine eligibility.

 
While negative savings may seem a significant obstacle to homeownership, doctors have several options. Physician home loans, down payment assistance programs, and partnering with medical organizations can all help doctors acquire homes with minimal or no down payment. It is crucial for doctors to thoroughly research and explore these options to find the best fit for their specific circumstances. With careful planning and utilization of these strategies, doctors can fulfill their dreams of owning a home, regardless of their negative savings.

Doctor Loans by Blake Mortgage

Doctor Loans by Blake Mortgage is a specialized mortgage program designed to meet the unique needs of medical professionals. This document provides an overview of the loan program, including loan amounts, eligibility criteria, underwriting guidelines, and other vital details. Whether you are a medical doctor, dentist, pharmacist, or nurse, Blake Mortgage offers tailored financing options to help you achieve your homeownership goals.

Loan Amounts

The Doctor Loans program offered by Blake Mortgage provides maximum loan amounts of up to $1,500,000. This generous loan limit allows medical professionals to purchase high-value properties and accommodate their specific needs.

Underwriting Guidelines

The underwriting guidelines for Doctor Loans are by the Non-Agency Underwriting Guidelines, with some product-specific criteria. It is important to note that additional guidelines not mentioned in this document must meet the parameters specified in the Non-Agency Underwriting Guidelines.

Eligible Borrowers

To be eligible for a Doctor Loan, at least one borrower must hold a valid license in one of the approved medical fields. The eligible licenses include the following:

1. Medical Resident (Educational License)
2. Medical Doctor (MD)
3. Doctor of Dental Surgery (DDS)
4. Doctor of Dental Medicine (DMD)
5. Doctor of Optometry (OD)
6. Doctor of Ophthalmology (MD)
7. Doctor of Pharmacy (PharmD)
8. Doctor of Podiatric Medicine (DPM)
9. Doctor of Osteopathy (DO)
10. Doctor of Veterinary Medicine (DVM)
11. Physician Assistant
12. Registered Nurse
13. Nurse Anesthetist
14. Nurse Practitioner
15. Clinical Nurse Specialist

Furthermore, the occupying borrower must provide proof of a valid license within one of the approved medical fields and meet the following requirements:

• The borrower must be within ten years of the start of their profession.
• For Medical Doctors, the borrower must be an active medical resident or within the first ten years of their profession, measured from the completion date of their residency.
• The borrower must be actively engaged in the eligible profession.

It is important to note that all borrowers can have only one outstanding Professional or Doctor loan at any given time. Additionally, borrowers should not have any other second homes or investment properties financed with the originating bank at the time of closing. Therefore, the total number of financed properties held by all borrowers should be at most four.

Ineligible Borrowers:

All trusts are considered ineligible borrowers for the Doctor Loans program.

Eligible Property Types

The Doctor Loans program covers the following property types:

1. 1-unit properties
2. Fannie Mae warrantable condominiums
3. Planned unit developments (PUDs)
4. Modular homes

Minimum Credit Scores

For minimum credit score requirements, refer to the Eligibility Grid provided by Blake Mortgage.

Qualifying Rate

The qualifying rate for the Doctor Loans program varies based on the ARM (Adjustable Rate Mortgage) term:

• 5/6 ARM: The greater of the fully-indexed rate or note rate plus 2%.
• 7/6 ARM & 10/6 ARM: The greater of the fully-indexed rate or note rate.

Qualifying Ratios

The maximum Debt-to-Income (DTI) ratio allowed for Doctor Loans is 45%. However, if the borrower has student loan debt that is deferred for at least 12 months from the application date, the DTI may exceed 45% up to a maximum of 50%. In such cases, the borrower must qualify using a payment equal to 1% of the outstanding balance on the student loans. It is important to note that the maximum DTI of 45% may only be exceeded due to the deferred student loan debt payments.

Reserves

Reserves are important in determining the borrower’s ability to handle mortgage payments. The required reserves for Doctor Loans are as follows:

• Loan Amount up to $850,000: 3 months of verified Principal, Interest, Taxes, Insurance, and Association (PITIA) reserves.
• Loan Amount $850,001 – $1,500,000: 6 months of verified PITIA reserves.

When borrowers have financed properties in addition to the subject property, an additional six months of PITIA reserves are required for each property.

Interested Party Contributions

Interested party contributions refer to funds contributed by parties involved in the real estate transaction, such as the property seller, builder, real estate agent/broker, mortgage lender, or any other party with an interest in the transaction. These contributions can be used exclusively to cover closing costs and prepaid expenses.

The following contribution limits apply based on the Combined Loan-to-Value (CLTV) ratio:

• CLTV up to 90%: Maximum 6% interested party contribution.
• CLTV up to 97%: Maximum 3% interested party contribution.

Minimum Borrower Contributions

Borrowers must contribute at least 3% of the transaction from their funds. The remaining funds can come from a gift per the Non-Agency Underwriting Guidelines, an acceptable FNMA-eligible Community Seconds Program, or an approved Gift/Grant Program.

Appraisal Requirements

The Appraisal Review Department will review all appraisals for Doctor Loans. The appraisal requirements depend on the loan amount:

• Loan Amount up to $1,000,000: One full appraisal.
• Loan Amount greater than $1,000,000: One full appraisal and a field review or two full appraisals.

Mortgage Insurance

Doctor Loans are underwritten by approved mortgage insurance companies. Each mortgage insurance provider may have additional restrictions not listed in this document. It is recommended to refer to each mortgage insurance company’s website for complete details.

Standard Mortgage Insurance Guidelines

Doctor Loans require mortgage insurance coverage based on the Loan-to-Value (LTV) ratio. The coverage requirements are as follows:

• LTV 95.01 – 97%: 35% coverage.
• LTV 90.01 – 95%: 30% coverage.
• LTV 85.01 – 90%: 25% coverage.
• LTV 80.01 – 85%: 12% coverage.

Conclusion

Doctor Loans by Blake Mortgage provides a comprehensive financing solution tailored to the unique needs of medical professionals. With competitive loan amounts, flexible underwriting guidelines, and specific eligibility criteria, this program aims to support doctors, dentists, pharmacists, nurses, and other medical professionals in their homeownership journey. By understanding the loan program’s features and requirements outlined in this document, medical professionals can make informed decisions and take advantage of the benefits offered by Blake Mortgage’s Doctor Loan program.

Don’t wait! Find out about your options today!

What do you need to know about refinancing Rental Properties?

Investing in real estate is one of the many ways to build up wealth. Homeowners buy a house, rent them out, and earn income from the rent. 

These houses for rent are purchased through home loans. If you have an investment property or more, you might want to revisit the interest rate as it might be high. Today’s rates are competitive, and you can take advantage of them by mortgage refinancing. 

Mortgage refinancing a rental property

You can get several advantages when you refinance your investment property. Below are some of the benefits that you can get. 

Lower interest rates
There is quite a difference in the interest of an investment property and a primary property. The interest rate of a rental property is higher than that of a primary house by 0.5% – 0.75%. The reason is that investment properties are riskier for lenders because banks and lending companies know that if you run into trouble with payments, a borrower will always choose to save their house than a rental property. For this reason, lenders implement higher rates on investment properties. 

However, if your rental property is doing well and your track record shows that you are doing well and can manage the payments, you can apply for refinancing and access lower interest rates. 

Changing loan terms
You can adjust your loan terms accordingly in a mortgage refinance. You can opt to pay more every month and shorten the loan length, or you can extend your loan terms as needed. 

Mortgage refinance rates can be changed from an adjustable rate to a fixed rate so that your monthly amortization is fixed. 

Increase rental income
To get the most out of your rental properties, you can do repairs and upgrades that will price your property higher. Some enhancements may include reroofing, adding a basement and renting it out separately, adding more space to the house, and adding appliances. A construction loan can finance these things, or if you are upgrading appliances, a mortgage refinance is the answer. 

What you need to do before a refinance

Before going into refinancing, here are some things to prepare and evaluate. 

Credit score
Knowing your credit score will help you understand your refinancing options if there are some loose ends that you need to take care of to improve your score. 

It is also helpful to know your current financial situation to take a mortgage to refinance. 

Secure documents 
Before refinancing your rental property, you need to gather financial documents similar to when you got the previous loan. These are some of the documents you will need to prepare:

• Full-time investors do not have W-2, so the tax returns can be used instead to comply with the documentary requirements.
• Copies of rent receipts to show your income helps lenders determine your debt-to-income ratio.
• Bank statements so that the lenders can see how much cash you have saved and have something for emergency expenses.
• Homeowners’ insurance is a requirement by all mortgage lenders.
• Provide a copy of rental leases on your rental property because these can give the lenders an idea of how profitable your property is.

Monthly payments
Computing for the monthly amortization will help you set a budget and decide whether to lower your monthly payment or increase it to end the loan term faster. 

Property value 
Before refinancing, research the value of your rental property to give you an idea of how much you can expect. 

Types of refinancing options 

There are three types of mortgage refinancing: rate–and–term, cash–out, and cash–in. Checking your finances will help you decide which is best for you. 

Rate-and-term
Rate-and-term refinancing is where homeowners can change their current loan’s mortgage rates or loan term, or in some cases, both. The goal of this type is to save money.

Cashout refinance
In cashout refinance, you make use of the rental property equity, where equity is the portion that you own, depending on how much you have already paid on the mortgage. Cashout refinance is simply taking a loan against the value of your rental property.

Streamline refinances
Typically, lenders check your income, credit history, and assets. Low-doc refinance programs let you bypass the whole verification process called “streamlined refinance.” The term is such because the requirements are more straightforward and faster. 

In a streamlined refinance, lenders waive the home appraisal, income verification, and credit score. Homeowners can avail the streamlined refinance loan if they are backed up by the federal government, such as VA loans, USDA loans, and FHA loans. 

Searching for Reliable Mortgage Lenders

You can choose to work with the same mortgage lender unless you find someone who can give a better deal. There are several lenders to choose from so take your time to compare different offers.

You will want to shop around and compare quotes from various mortgage lenders. Shopping around and comparing rates can help you save money.  

Once you have narrowed down the offers, select the one that gives you the best advantage.

The internet is still the best place to find the best one for your taste. While looking, you can also read the reviews by other clients because this says a lot about the lender.

Blake Mortgage is a mortgage broker based in Arizona. Highly professional and work closely with clients. If you are looking to finance the rental properties or refinance your mortgage, you will get the support you need and help you through the entire process. 

Being in the industry for quite a long time, Blake Mortgage has developed an extensive network that can handle any transaction, no matter how tricky it can be. A company that has a personalized approach when handling clients.

With the low-interest rates today, more people are looking to buy investment properties and refinance their mortgages. Whether it is your first time or your nth purchase of real property, you want a mortgage broker whom you can trust.

Are you an active service member, veteran, or surviving spouse? Do you know that you can obtain a zero-down payment VA home loan? This can be the best financing option to purchase a home or even refinance your home. Your dream to become a homeowner can be realized sooner than later. However, there are some setbacks you need to know before making a decision.

What is a VA loan?

A VA loan is a mortgage offered through the U.S Department of Veteran Affairs. It is designed to help active-duty military personnel, veterans, and service members become homeowners at an affordable cost. This type of loan has generous terms such as no down payment, requires no mortgage insurance, have lenient rules for qualifying, to name a few benefits.

How do VA Loans Work?

Although the Department of Veteran Affairs offers VA loans, the government does not necessarily design the loans. The government, through the department, determines who qualifies for the VA loans and which lenders issue the loans. The department can either back you up in the loan or have the loan given to you directly. These loans come in a different form from which you can choose.

VA Loan Eligibility requirements

To meet the eligibility requirements, you must have done your service time.

• If you are on active duty, this translates to 90 consecutive days.
• If you are a National Guard or Reserve member, this means 90 consecutive days.
• If you are activated or six consecutive years if you aren’t.
• If you are a veteran, the required service time varies.

Find more at va.gov.

However, there are some setbacks you need to be aware of. Let’s discuss below; read on to find out more.

Funding Fee

Although VA loans have very generous terms, you have to pay funding at closing. This fee is charged to reduce the weight of U.S. taxpayers. However, the following are exempt;

• A service member with service-connected disabilities
• A surviving spouse of a Veteran who died in service
• A service member who has received a purple heart

When you take your first VA loan and make zero down payment, the funding fee is 2.3 percent of the amount you are borrowing. With subsequent borrowing, the VA funding fee increases.

Here are some setbacks that VA’s tend to encounter along the way:

Primary Residences Only

Another setback of VA loans is that they are limited to primary residences as opposed to conventional loans. You cannot purchase a second home, an investment, rental property, or a vacation home; this is a significant disadvantage because you cannot purchase any property that brings you money. You are buying a liability instead of an asset in an absolute sense. Therefore, a VA loan is not the solution if you want to buy an investment property. In this regard, a VA loan encounters a loan setback.

VA Appraisals and Inspection

A VA appraisal comes with red tape around it. Because VA appraisals require additional information not needed by other loan-type appraisals. The VA is more extensive than any other appraisal. Some VA Loan Minimum Property Requirements(MPRs) include:

• Adequate roofing
• No lead-based paint
• Mechanical systems that are safe to operate
• Adequate heating systems
• No signs of termites, dry rot, or fungus growth
• No crawl spaces and signs of leaks in basements

Although the intensity of the VA appraisal can keep potential borrowers from owning defective properties, the closing will take ages. Due to the bureaucracy of the government, the appraisers are slow and end up undervaluing homes.

Seller Resistance to VA loans

Many sellers find VA loans unattractive; this makes them uncomfortable, and they end up resisting VA home loan deals. Some of the reasons are; VA appraisals- as discussed above, which impose minimum property requirements that require a home to meet the agency guidelines for safety and livability. They have extensive appraisals such that they undervalue homes. Which makes sellers resist most of them. In some markets, sellers must pay closing costs if veterans buy a property with zero down payment. Most sellers frown at such offers. The closing process of the VA loan may be extended due to delays in paperworks. Sellers want fast business, and this is not pleasing to them at all.

You May Have Less Equity in Your Home

Ironic because buying a home with little or no money is one of the most significant advantages of a VA loan. However, this can also be a disadvantage. A person will have a property that is 100% financed once they move into the home. When the VA funding fee is added to the loan amount, there is a negative equity position from the beginning. If the property’s value increases in the market, this becomes a temporary problem. But, if the market is either flat or declining, there’s a severe problem. Needing to sell your home and have no equity, forced to write a check at the closing table to cover any closing costs associated with the sale; not a typical case but a potential disadvantage you need to be aware of.

Finally, even though you’re eligible for a VA loan, it may not be your best financing option to purchase a home. Depending on your financial position, you might want to weigh your options and choose the best option for yourself. If your best choice is a VA loan, then be sure to do your due diligence and find a reputable VA lender. The lender you choose will determine how your loan application process will go. Finding a company that does a substantial amount of VA business is the safest way to take. Most lenders have no experience with VA loans and may end up giving you unnecessary headaches.

Building a home is an exciting and complicated process. It’s exciting because you get a chance to tailor your home according to your lifestyle, budget, and family. It gets tricky when the costs add up fast and you don’t have the cash on hand to pay; this is when a construction loan comes in handy. When applying for a construction loan, there are some things you need to avoid. Read on to find out more.

What is a Construction Loan?

A home construction loan is a short-term, higher interest rate loan that provides the money required to build a residential property. The loan duration is usually one year. The property is built, and a certificate of occupancy is issued during that period. The funds are allocated in stages as the work progresses.

How Do Construction Loans Work?

As mentioned above, construction loans have variable rates which move up and down with the prime rate. Construction loans have higher rates than traditional loans; this can be attributed to the fact that your home acts as the collateral with conventional loans, but construction loans have that privilege. You provide the lender with a detailed plan and a realistic budget. It helps them plan on how they are going to issue the funds.

Some of the things you need to avoid during this kind of loan are explained below.

Avoid Early Starts

An early start may seem reasonable because you have a timeline – you want to get started with the project right ahead. However, this can be a risky undertaking. An early start can significantly delay the loan closing. The title agency will request an early start coverage if the construction has already started. There is no guarantee that this will be granted, resulting in no title insurance coverage. In this case, your loan may not be even be closed.

Avoid Additional Loans or Credit Lines

It would be wise to stick with your current loan during the construction period. Never add another loan or credit line, or you will get yourself in trouble; this can be detrimental to the project because it increases the total cost of borrowing and the level of debt on a project, leading to difficulties in repayment.

Do Not Do the Building Yourself

It gets more difficult when you are doing the building yourself. Lenders are hesitant to lend money to owner-builders. They are afraid that non-professionals have more chances of delays and problems. Unless you are a professional contractor, maybe they would.

Avoid Changing Jobs at The Time of Construction

Many people think that it is a good idea to be changing jobs during the construction process. It is dependent on your employment. Any sudden changes are never a good idea.

Avoid Going Past Due on Other Existing Loans

When you have other existing loans during the construction period, it is best to pay on time. Any past due can lead you to late fees or penalties.

It is crucial to stay close to your lender during the construction period and inform them if anything does not go as planned. So before starting your loan, make sure you know what to avoid. The more you are knowledgeable, the lesser headaches you will encounter.

References

https://www.bankrate.com/mortgages/construction-loans-explained/

https://www.quickenloans.com/learn/construction-loan

https://www.thebalance.com/basics-of-construction-loans-315595

As investment values increase in many areas, savvy real estate investors recognize the opportunity to tap into their property’s equity. A cash out on investment property is one of the best opportunities to make the most out of this situation. There are countless uses for those funds — home improvement projects, adding new property, or managing other financial needs unrelated to the property itself. Depending on the amount of equity, you could see a significant amount of financial improvement, and especially with a cash out refinance with no income documentation.

How does a cash out refinance on investment property work?

A cash out refinance allows the property owner to secure a new mortgage on the property for more than they currently owe on it. They then receive the difference (new mortgage amount minus what is owed and closing costs). Using a real estate investment, it’s possible to capture funds during these high home value times to use to advance your portfolio or simply lock in low rates for other needs.

Why use a cash out refi?

Many property owners, including investors, have equity in their real estate that they don’t tap into and use as readily as they should. Yet, they may be paying a much higher interest rate on unsecured debt or battling financial difficulties in managing their investment business. Interest rates on real estate are competitive — and the same goes for cash out refinancing. Taking advantage of those funds now may help to make your financial future a bit stronger.

What are the details and specs of a cash out refinance on an investment property?

If it is time to improve your cash reserves through a cash out refinance loan, here’s what you can expect from us:

•      Get up to 75 percent loan-to-value on your home – no reserves required

•      You may not need any employment or income documentation to secure these funds.

•      Boost investor cash flow to use as you need.

•      Borrow up to $2 million

•      30-year fixed loan (no bothersome adjustable-rate mortgages to worry about)

You can use this type of loan on most types of real estate, making it more accessible to many real estate investors. That includes:

•      Single-family residences

•      2-to-4-unit condos, townhomes, and non-warrantable condos

•      Non-owner-occupied properties only (cannot be used on primary residences)

There are a few other things to know about a cash out refinance on investment property. For example, to qualify on cash flow, you’ll need 12 months reserves for negative cash flow. The cash out can be used to cover reserves.

What can you do with a cash out refinance loan right now?

Expand your horizons when you consider all the potential options for using these loans to meet your needs. Many times, property owners use these funds to put value back into their investment properties. You can do this in many ways, including home improvements. Get the property in better shape so you can attract a higher-paying tenant. It may be possible to use these funds to expand the existing property’s footprint through an addition. That may allow investors to increase their rental opportunities.

Other investors use these funds to invest in another property. Buying another rental property with a low-interest rate and low monthly payment. Therefore, using these funds simply makes sense for many people. It is one of the best ways to expand a real estate portfolio in current conditions.

Pay down personal debt with these loans. While mortgage payments may continue for a bit longer on the property. At the same time, you may be able to comprehensively pay down your debt outside of that loan. Therefore, it may save you money since interest rates tend to be much lower on a cash out refi than personal, unsecured debt.

Use the funds in any way that fits your needs right now. Tuck them away for the future. Know that a cash out refinance loan is one of the most effective ways of utilizing the value of your property.