SOME COLORADO RESORT PROPERTIES ARE A CHALLENGE TO MORTGAGE, BUT NOT IMPOSSIBLE

Can you finance your dream home? Maybe not?

The nature of a resort community means that we often have residential condominiums that are located in less than traditional buildings, and may have very untraditional ownership situations. Some Colorado resort properties are a challenge to mortgage, but not impossible. These properties present a unique set of challenges for any lender to finance.
The problem stems from the fact that most mortgage money is raised by lenders raising pools of money in the bond market to lend as mortgage funds. To sell these bonds the lender must generally specify what the funds will be used for, and most often it is for mortgages that are made in compliance with Fannie Mae and Freddie Mac guidelines.
This means that the properties must meet fairly stringent guidelines in terms of what type of property is involved, and properties that are located in situations such as are common here do not often meet those guidelines. This entails such situations as condominium hotels, mixed use buildings with commercial space on the ground level and residential above or associations which include both whole ownership and deeded ownership.
As we all know, these properties are often the most expensive and desirable properties in the valley, and in the event of an economic downturn would probably hold their value better than many properties in the valley, putting the lender in a fairly secure position. In addition, if a lender did end up owning such a property it would be fairly easy to resell or manage until such time it sold.

What are your options?

Recognizing this, mortgage lenders have turned to untraditional sources for such financing, generally known in the industry as portfolio investors. These firms hold mortgages in their own investment portfolio rather than funding them with the sale of securities. As a result they can set their own guidelines as to what is acceptable and what is not in terms of types of properties.
These loans are generally slightly higher in rate than a conventional mortgage, though not always. Where they often shine is if the loan amount is considered a jumbo, that being anything above $625,000. In traditional lending, jumbo loans cost more and conforming loans (those below the $625,000 mark) Portfolio loans generally have no such distinction and carry a rate that is somewhere above the average conforming and below the average jumbo rate. So if you need a large loan you may find a better deal than you thought you might, and if you need a smaller loan it might cost you slightly more than you would like.

Portfolio loans often come in attractive adjustable programs as well. Generally rates are fixed for a period of say 3 to seven years before they adjust. This gives the lender the flexibility to make sure his investment will earn a market rate of interest, without committing the money up for 30 years at a given rate. As few people ever really stay in a loan for seven years it is a win-win situation for everyone.

How do you qualify for a stated income loan?

These loans often carry features that simplify the qualification process, such as allowing for stated or non-income verified loan approval. The loan to values may be lower than average in these situations, but to many borrowers it can be a real advantage. If your finances are pretty complex and involve partnerships, corporations and numerous diversified holdings the paperwork on a traditional mortgage can be staggering.

With a stated income program you simply state the income you make and verify tot he lender a certain amount of liquid assets and if everything appears to be reasonable your loan can be approved without tax returns, P&L’s and balance sheets from all your entities.

There can be advantages and disadvantages to a portfolio loan given a particular situation. If you think you might benefit from such a situation contact me to discuss your situation and what options might be best.