San Francisco Chronicle - (Sunday)
Portfolio loan program saves purchase of investment property
Mortgage broker:
John Holmgren, Finance of America Mortgage.
Property type:
Single-family residence in Oakland.
$1.108 million.
Purchase price: Loan amount: Loan type: Rate: Backstory:
$664,800 30-year fixed. 3.25% with no points.
My clients found me online, possibly having seen my stories in this newspaper, after being declined for financing. Two couples were using the proceeds of sale of an investment property owned by the older couple (parents of the other couple) as a down payment on a new property. Because the transaction was done as a 1031 tax deferred exchange so that capital gains taxes would be avoided on the sale of the original property, this property purchase had to be categorized as an investment property purchase.
Because the younger couple was renting, the lender they had selected declined the loan application, saying that it did not make sense for them to be parties to an investment property purchase when they were renters. When the clients originally approached me they were well into their escrow period with only a couple of weeks left for closing. As a result, my immediate instinct was to see if there was a way to salvage the application they had already made. I suggested that they notify the lender that the location of the property being purchased was not advantageous for the renters because it was in Oakland while their employment was in Silicon Valley. They gave this a try to no avail.
We were able to get the appraisal transferred into our application and used one of our portfolio 30-year fixed rate programs that had the advantages of quick processing and favorable rates relative to terms available for mortgage agency products. While escrow did not close quite on time because of our late involvement, because I knew the real estate agents who represented the parties to the escrow I was able to credibly assure them that the transaction would lead to a successful conclusion.
Lender requirements often appear to be arbitrary and nonsensical, but when this is the case it is probably because of the lender’s prior experience that may or may not be comparable to yours. Thankfully there are many lender options such that a solid application will normally be successfully closed.
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