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JUST SAY "NO"
By Joel S. Pate
Every one-time close construction permanent lender has a group of "permanent loans" that allow the construction element that we have previously discussed.
I know of many lenders that offer a SISA and a NINA, but not on the construction perm loans. Why you might ask? I don't know and it doesn't really matter, does it? If they don't offer it, you can't sell it, if you can't sell it, why worry about it.
That is one of the most important things you need to learn to be successful in this niche, so it bears repeating:
If they don't offer it, you can't sell it! So if you can't sell it, why worry about it!
This reminds me of a situation from my early days as a builder. At that time, the rates were around 12% on a FHA loan. The Housing Authority had bond money at around 10%. So, of course, we were pushing everyone to the bond money.
If you have had experience with bond money loans, or loans dealing with the government, you will know exactly what I am talking about.
In this particular case, the borrower's income included a lot of overtime. Since the employer could not guaranty the overtime, the lender would not use it for a FHA loan, but since the borrower had received the income for so many months, the bond authority required the lender to include the income. Thus, the borrower didn't have enough income to qualify for a FHA, without the overtime that was not guaranteed; he had too much income for the bond loan.
Needless to say, I felt like a 16 year old with no date to the prom.
A fearless mortgage banker, this was back in the eighties when mortgage bankers actually did a lot of business, said "this is unfair, I'm going to get them to change the rules."
You see, this mortgage banker tried to change the rules of the bond authority. He did not know, or did not realize the significance of the restrictions placed on the bond authority by the tax free bonds that the bond authority had sold to investors to generate the lower rate.
The bonds, in order to obtain the tax free status, specifically stated the income limitation. There was no way that the bond program would jeopardize the bond pool so that one guy could obtain financing when he did not quite meet the guidelines.
The result to me was that my house sat on the market for months longer while this moron tried to "change the guidelines." I should have spent my time finding another customer. I had to anyway!
The point of the story is, do not waste your time trying to change the rules. So in our case, do not try to get the lender to include a SISA loan on their construction program if they don't advertise that they have one. Go with the flow. Find a borrower that meets the lender's criteria.
This tidbit of information will save you a lot of time and money.
IF I COULD GET YOU TO UNDERSTAND ONE THING, IT WOULD BE:
- KNOW WHAT THE LENDER OR LENDERS YOU USE OFFER.
- KNOW IT COLD.
- KNOW IT BACKWARDS AND FORWARDS.
- AND WHEN YOU SEE A LOAN OPPORTUNITY THAT DOES NOT MEET THOSE STANDARDS, SAY, "THANK YOU VERY MUCH, BUT, THIS LENDER DOES NOT OFFER THAT PROGRAM AND I DON'T KNOW OF ANY OTHER LENDER THAT DOES."
- NOW GO OUT AND FIND A BORROWER THAT MEETS THE GUIDELINES OF THE LOANS YOU ARE AN EXPERT AT!
Brain Sacks would tell you that this is sound advice. You cannot be an expert at everything and construction perm lenders have specific products and that is it.
Remember, you make money when you say yes and you make money when you say no. When you say maybe, and go out and spend a lot of time trying to make something work, you are wasting your time and the time of the borrower.
When you know your products inside and out and you are faced with an opportunity but you do not have a home for the loan, say no as fast as you can.
More soon on finding investors in your market.
If you would like to receive additional information regarding one-time close construction permanent lending, send me a request by visiting www.vadiumgroup.com/cpexpert.php.
Dedicated to coaching YOU to CP Loan Success!
Joel S. Pate
Joel S. Pate, a dedicated entrepreneur, has spent more than two decades in the building, mortgage, and real estate industries and has been involved in over $100 million in construction loans and over $1.3 billion of residential lending.
As the CP LOAN EXPERT columnist, Mr. Pate provides straightforward, unbiased advice about every aspect of construction permanent lending. If you ever wanted to unravel the mystery surrounding new construction lending, then you should tune in.
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