How to get an easy hard equity loanGary Opper, CPA, CFPhard equity loans
Hard equity loans aren't as hard as some mortgage brokers think.
They are easy. Some mortgage brokers are afraid to do them because
they think the loans are different and difficult. They think these
loans are tough or that the client would not accept the high
interest rate of a hard equity loan.
Hard equity loans are quite easy. Lenders do most or all of the
processing. Your mortgage company never has to buy back a loan
because all of the verifications are done independently by the
mortgage lender. There is very little processing; no verification
of a mortgage, income, assets or debts; no calculation of the debt
ratio and no credit scoring. The credit report is generally not
even reviewed by the lender.
These loans are for clients who have:
- No "stuff" to qualify;
- No time;
- No credit;
- No income;
- No assets;
- No job;
- Low or no credit scores; or
- High or no debt ratios
What you will need to get a loan
There is very little needed in order to close a hard equity loan.
The only thing a lender really looks at is one fraction. The
numerator is how much the borrower wants, and the denominator is
how much the property is worth. If that fraction is 65 percent or
less, the loan will generally be granted.
Everything else is superfluous; that is, the lender does not
care about the borrower's story. The letters that try to explain
credit issues are unnecessary. The lender doesn't care why your
client is in bankruptcy or foreclosure.
Since the lender places so much emphasis on the property,
generally, the lender will control the property valuation
procedures. The lender will either personally inspect the property
or will have an appraiser inspect the property instead. Usually,
the mortgage lender will order the real estate appraisal.
Of course, you will have to do all of the federal and state
disclosures that are required. These disclosures include a proper
and accurate good faith estimate, a broker agreement and a Truth in
Lending statement. If this is a Home Ownership and Equity
Protection Act loan, all of the proper Section 32 disclosures may
be required.
A payoff statement will be required if the first mortgage is
being paid off. A verification of the first mortgage will be
required if this is a new second mortgage. Additionally, hazard,
flood and windstorm insurance will be required.
The lender will also require some type of application - perhaps
a Form 1003 (Uniform Residential Loan Application). The application
will be skeletal, requiring the name, home address and home phone
number of the borrower. Also needed will be the borrower's Social
Security number, work phone number and emergency contact phone
number.
A title policy will be required. The title policy is generally
ordered through the lender's attorney or title company. Generally,
the lender has a relationship with a closing agent who is familiar
with the procedures of closing a hard equity loan fast. Using a
lender's closing agent will expedite the closing, since the closing
agent will be familiar with the hard equity lender's procedures and
policies.
Time is of the essence
Hard equity lenders close loans in one to three days. If all the
documents are available, the loan can close very quickly. Using the
lender's vendors, appraiser and closing agent will expedite the
closing.
Hard equity loans are quick and easy. They are available for
clients who have sufficient equity in their properties. If you have
a loan that needs to close quickly or that you are having trouble
gathering documentation for, suggest a hard equity loan to your
borrower as a quick solution to his problem.
Gary Opper, CPA, CFP is the president of Approved Financial
Corporation and is past president of the Florida Association of Mortgage
Brokers Miami Chapter. He may be reached at (954) 384-4557 or
e-mail
[email protected].
