Can You Finance it? Five Things to Watch Out for.
Can You Finance it? Five Things to Watch Out for.
Full Video Transcript Below
Not Financiable? Why?
Well, good morning, Southern Oregon, Alice Lema here, broker John L. Scott here with another edition of my podcasts. My weekly podcast is so much fun today. We're going to talk about financing and our properties financeable or not financeable. So today's title is called. What do you mean it's not, financeable? Five things I want you to know before you buy or sell something that may or may not be financeable.
[00:00:26] So. Financing. Let's talk about what that is. That is most of us get mortgages. We have a down payment, we have a decent credit score. We have enough money coming in every month that the lender is comfortable with us making a certain level of mortgage payment every month. So what a a lot of people don't know is that these mainstream lenders have more criteria than that.
[00:00:49] They're not just having criteria for us as buyers. They have criteria on the property itself. And that's what we're going to talk about because a lot of people are not aware of that. Sometimes very subtle differences in the kinds of property and the condition of the property, that may or may not be comfortable for a lender to give you a mortgage on.
[00:01:08] So the first one I want to address is mobile homes in a park because I get a lot of phone calls, especially since here in our area we had those fires almost a year ago. We lost a lot of housing in mobile home parks, especially the senior parks and typically the 55 and older parks are not financeable. So we don't have mainstream lenders that want to do mortgages on that.
[00:01:33]Additionally in the manufactured park world, the single wides are not usually financeable. The old, older manufactured are not financeable and manufactured homes that have been moved more than once are not financeable.
[00:01:53] So that's kind of a long list and a long way of saying here's what is financeable, a double-wide in a family park, not age restricted, but a family park. There are some lenders that will do loans on that. So if you have a double-wide in a family park, that's 1980 or newer, sometimes we have lenders that'll go down to 1976, but kind of that 1980, you should be pretty safe or newer. We do have some lenders that will do those mortgages.
[00:02:22] It's not a bunch of them. There's just like a handful, but we could hook you up with somebody, if you are willing to live in a family park and have a double-wide and have it be newer. And then there are also some condition, like they want it to be in decent shape. They don't want it like really torn up or anything, but that's kind of the, that's kind of the list for manufactured houses in a park.
[00:02:50] Okay. So what about manufactured houses on land? So that's considered real estate. And we have lots and lots of lenders that'll do that, but they don't want the house to be a single-wide. They also don't want it to be too old. So again, probably that 1980 ish range, and then they also want it to be a double wide.
[00:03:11] So they want a double wide on land. They want 1980 or newer usually. And it has to be in good condition. Some lenders want a foundation, some are okay with the little post and pier foundation system. And those kinds of properties are usually financeable by lots and lots of mainstream lenders. So you shouldn't have any trouble getting financing for that.
[00:03:36] Now, sometimes the insurance is higher. Sometimes the interest rate is higher. Because they just are, I don't know why. But you can work that into your budget, but that is considered a regular real estate kind of property. So it should be no problem getting a mainstream mortgage on that. So what about properties that are damaged?
[00:04:00] So each loan program and by loan program, I mean, some people have enough down payment and a good enough credit score, for a conventional loan. Some people are FHA, some people are veterans. The VA there's also the USDA and the USDA is follows the same criteria that the FHA and VA. So it's a little more strict in the condition.
[00:04:26] And also, I don't think the USDA will do a manufactured on land at all, but we'll have to double check because rules do change. But for the most part we're talking about damaged property right now. So if you have a stick house or a manufactured, but we're going to talk about stick-built mostly that is severely damaged. Not all of the loan programs are going to go along with that. And it's up to the appraiser to make the list of what they think is wrong with the house that needs to be fixed before the loan finishes. So those are called lender required repairs. And this is another thing people don't realize there's two steps in the appraisal.
[00:05:09] It's not just all about how much it's worth it’s also what the condition of the property is in. And if it's comfortable for the, the lender to make the loan, because you know what they're worried about, getting it back in a foreclosure, that's what that is all about. That appraisal and the repair list from the lender is, is all about what do we do if we have to take the house back. They want to make sure it's in good enough shape that they can sell it again.
[00:05:34] So, and this is different. This is a different repair list than your home inspection. The home inspection is way detailed. They flush all the toilets. They, you know, run the dishwasher, they check everything.
[00:05:45] The appraiser is just looking at kind of a, a shorter list. And then big things. So looking at the roof, the windows, they want to make sure the windows open. It's okay for them to be old, but they want them to open. They want to make sure there's heat. So for example, if you have a property with no heat at all, that's not financeable, but at least here in Southern Oregon, you can have wood heat and they'll count that.
[00:06:07] And they'll a lot of times do the loan. The other thing is you have to have water and they don't like water coming right out of a spring or a pond. They worry about bacteria which is oh, a real bonafide concern. But they prefer a well so that it's financeable so if you don't have water, you don't have heat or the property is damaged to some degree, then the lenders don't want to do the loan.
[00:06:35] So, but there are ways of working around that. But you know, go through the rest of the list of what is not financeable so that you are prepared. Because now we have certain kinds of construction besides manufactured in a park that are not financeable. Log houses a lot of times they're not financeable, straw bale, a geodesic dome construction, any of the alternative kinds.
[00:07:01] Well, the lenders call them alternative alternative kind of construction. They, we have a really hard time finding lenders, finding mainstream lenders to do those kind of mortgages. There's also insurance companies that don't like them. So even if we can occasionally find a lender to do that mortgage then we have to check with the insurance company.
[00:07:23] So if you have your heart set on alternative construction and you don't have cash, then we want to set you up for success, right from the beginning. And do a lot of homework on what lender are you going to get? What insurance company are you going to get? So that all that is set up ahead of time, because there's nothing worse than going out and writing an offer and maybe even getting it accepted and then to find out you can't get insurance. Or the lender goes, oh, well, half that house has a geodesic dome. I didn't know that. We're not doing the loan. So that really sucks. So anyway, there's certain kinds of properties that have certain kinds of construction yeah that lenders don't like, okay. So alternative log straw, bale, dome construction.
[00:08:06]We don't know yet about the 3d printed houses. We should start calling the lenders and asking, cause I'm watching more and more experimentation with that. That could be very interesting. So I'll make a note to check on that. The other thing, lenders don't always like, vacant land. They like buildings.
[00:08:24] And again, it has to do with the foreclosure process. But with vacant land, a lot of times you could get a construction loan and they'll help put that purchase together. Also builders themselves can sometimes buy the land and do the construction all in one fell swoop.
[00:08:40]Also the manufactured home like the double-wide people that sell them brand new on the lots. Those folks have land, they call land sale, land, purchase packages, so they can sometimes do that financing for you. So now we're kind of talking about what do you do? I guess we're working our way into, what do you do now? If these properties are not financeable and you really want that property. So we just talked about, sometimes you can get a, a builder or a construction loan or something like that, or a manufactured home manufacturer to do it for you.
[00:09:17] There's also, what's called private lenders. The private lenders are usually just people with a lot of money and this is, they're investors and this is how they make their money. They usually charge a lot of interest. The ones that I have been sending referrals to over the years, eight to 12%. And that is just how they roll and they want big, big down payments.
[00:09:41] And again, it has to do, if they get the property back, they want 30% down, 50% down. And they care also about what kind of a property it is to some extent. But it's more individual because they're just investor people.
[00:09:54] So a lot of those folks will go out and look at the property ahead of time and decide. Or I can just send it to them in an email. Actually, they liked that a lot because they can still be in their home doing their business without having to go anywhere. But yeah, so private lenders very expensive, but a great, great way to get the property in your name. As long as they're happy with it, the condition and the kind of property it is.
[00:10:19] You can also do cash only. You know, cash is king, always, always but you're going to be in a, a different price range, probably because most of us can buy bigger properties if we're getting a mortgage. But that is, that is an option.
[00:10:34] And then if you have a property to sell that does not finance and you decide not to do any of the repairs or not to somehow work within a structure that the lenders like, the mainstream lenders. If you're going to just be getting cash offers, you're going to lose a certain amount of value because the cash people, there's just not as many of them, your buyer pools going to be smaller and they want a deal. They know you're not financeable.
[00:11:01] So they're going to like, you know, they're going to, they're going to negotiate more. That's just how the market works. But if it's a condition issue or damage, there are those rehabilitation loans. And they are more time-consuming, they're a little bit more expensive, but those do solve a lot of problems.
[00:11:19] So rehab loans can definitely be a big help. You can't use a rehab loan on a geodesic dome or a straw bale. But if it's just a broken house, like I, like, I like to call them then the rehab loans are great. Okay. And I have a secret list of lenders that do all of these over the years. I have found one or two people that will do an, an in park 55, but it's not a mainstream lender.
[00:11:50] And I only have one or two of them. I also have people that will do a loan on a mobile home, on land, but that's been moved twice. That means it didn't come from the manufacturer to the land. It came from the manufacturer to somewhere and then to the land. So that's called moved twice. A lot of mainstream lenders don't do that, but I have one or two that will. I have a lot of private lenders.
[00:12:12]I've great access to rehab loans. So I have access to, to those kinds of programs. They're just limited. And when you don't have choices and you end up paying more and you have to go by their rules. So it's always better to have choices, but if you end up in that situation or you have a property that is like that, then you want to fix the problems ahead of time.
[00:12:34] And if you can't, then you advertise that you can use a rehab loan. Or a construction loan or something like that, so that you'll try to get a bigger buyer pool and sell your property for more if you're selling. Okay so if you're writing offers on properties that are not financeable, then understand ahead of time, the, the kind of limitations that that sort of property has. Because you can probably write your offer lower because you're not going to have very much competition.
[00:13:07] So keep that in mind, especially if they don't have multiple offers and you're not competing with cash people you know. Or it's been on the market a long time. I think those are great strategies. And then if you have a property to sell, do your homework again, do your homework ahead of time so that you can let the buyers know in the listing what the alternatives are.
[00:13:27] Cause a lot of people don't know, a lot of real estate agents don't know how to make these things happen. And if you're just going to sell something to the cash buyers only, then you're going to have to discount probably quite a bit. Unless it, you know, if you have multiple offers because of other market conditions, but normally in a normal market, if you have a cash only situation, then the seller suffers a little bit financially. But sometimes they're okay with that because they just want out or they want it to be fast.
[00:13:57]Estates, estates do that a lot. Sometimes they'll just say, just sell. As is we'll take less just to be done. So there's opportunities in that too, if you have that kind of a, a seller situation. So there's my five things I want you to know before buying or selling a non-financiable property. And a little bit of explanation of why financing matters in the world, whether you're a buyer or a seller.
[00:14:24] Okay. So if you've got any questions, any comments, leave them here. Call me, text me (541) 301-7980. I'm around all weekend. I'm here to help. I want to be your agent. I'm a great buyer's agent, great listing agent. So give me a shot. And let's talk about what's going on in your real estate life. Alice Lemabroker, John L. Scott, have a beautiful Southern Oregon weekend. Bye now.