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How to Finance Unique Properties
I've got a buddy who's
an architect that caters to the shall we say, eclectic
home buyer. Not that his customers are all a few eggs
short of an omelet, it's just that their homes could
make the cover of Architect magazines or are converted
drug stores, lofts or dance halls. If you are one of
those lucky few who can find an old movie theater in
a west Texas town that screams "turn me into a
home," you'll soon find that conventional lenders
can't help.
Even if one can get construction money
to remodel an old barn into a residence it might be
difficult to find a permanent mortgage to replace the
construction funds.
Finding a way to obtain financing on such
properties falls outside the box. Many times way, way
outside. Agency loans (Fannie Mae, Freddie Mac) and
other pools of money (RFC) insure that if a lender makes
a loan under certain guidelines (theirs) then that lender
can pretty much be guaranteed that loans' ability to
be sold in the secondary markets.
These sales, sometimes individually (flow)
or packaged up and bundled in millions of dollars of
loans (bulk) provide liquidity in the markets resulting
in, among other things, more competitive rates. These
are about as close to a commodity in mortgages as they
come. So what?
Such loans have two "underwrites",
one for the individual (can they afford the home, do
they have good credit) and one for the property (are
there similar ones in the market area indicating a demand
for that product to establish a market value on which
to base the loan?)
If indeed the borrowers can provide at
least three other comparable sales in the area of similar
fashion and the property meets zoning requirements then
it's more likely to get conventional financing. But
most of these properties are anything but conventional.
So what to do?
One is to take current equity out of other
property to build or simply to find a "portfolio"
lender. A portfolio lender, usually but not necessarily
a retail bank, does not intend to sell the loan at any
time and can therefore make any type of loan it wishes.
In these instances, the bank is making a loan more to
the individual and caring less about the property type.
More akin to the days of the Bailey Savings and Loan.
Making loans to individuals. These loans are usually
of shorter term, say three or five years and can certainly
be extended and such loans may not be available to everybody.
Banks usually make these loans at the request of a bank
customer in good standing or to individuals a bank may
want to establish a relationship.
Article continued at http://realtytimes.com/rtcpages/20020823_uniqueproperties.htm
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