AGILE FUNDING SOLUTIONS

SIMULTANEOUS CLOSING STRATEGIES

THE TRADITIONAL STRUCTURE for the hypothetical $100,000 sale priced house is as follows: $5,000 down, $95,000 first, 8-10% interest, 30 year amortization, 5 year balloon. There are several problems with this structure when it comes to buying this mortgage on a simultaneous close basis. First, there are loan to value limitations that will keep the purchase price of the mortgage somewhere between $70,000 and $80,000. This creates a $15,000 to $25,000 discount, which means you are only getting perhaps $85,000 total cash for your property. Second, the 5 year balloon. Many have been taught to include balloons because it will increase the cash they receive. In some cases this is true but in most cases it is not true. Since the offer on this mortgage was limited by LTV, a balloon would not make a difference. In general my source ignores balloons when quoting. They believe that if the payer has a credit glitch or job issue or some other problem at the present date, then there is no guarantee that he can refinance to payoff the balloon in 5 years anyway. They also believe that since 30 year mortgages amortize so slowly, his balance has barely gone down after 5 years, thus the balance may be too high to refinance anyway.

A BETTER WAY TO STRUCTURE YOUR SALE AND GET MORE CASH QUICKER

Using the above example, let's change the terms as follows: $100,000 sale price, $5,000 down, $85,000 first mortgage, and a $10,000 second mortgage. The suggested terms of the first mortgage would be for 30 years with an interest rate at 11.5% fixed. Our company might make an offer to buy this mortgage for $80,000. This assumes good credit with an Experian-FICO greater than 595. Remember, this is just an example each situation will vary depending on all the factors.

What does this mean to the seller? First, he is now only taking a $5,000 discount , instead of $15,000 - $25,000. Second, he can keep the $10,000 second mortgage and set the terms. The terms on this second make no difference to us. He is now going to receive $95,000 for his house rather than $80,000. The seller can add up the sum of the monthly payments that he will receive during the term of this second. When this sum is added to the down payment and the cash to buy the first mortgage, the total is usually very close to the original selling price of the house.

What does this mean to the buyer? He will most likely get the house, because the seller will probably say yes to the deal. The buyer will make two mortgage payments, one on the first mortgage and one on the second. He has a higher interest rate than what he wanted but since he could not get a loan, who is to say what interest rate he really deserved.

When borrowers have less than perfect credit, they often have to settle on mortgages with rates between 10% and 14%. Buyers with less than perfect credit might complain about the rate on the first at 11% to 12%, but this is only to maximize the offer to the seller. A lower interest rate is fine with us but it would lower our offer.

DETAILS. Our minimum down payment requirement is 5% (Ask us about our LOAN ORIGINATION programs for "zero down deals.") However, we prefer a down payment of 10% or more. With strong credit we would recommend that the seller takes back a first mortgage at 90% LTV and a second mortgage for 5% LTV with 5% down. This is also known as a 90/5/5 (90% first mortgage, 5% second mortgage, 5% down). We can also structure the following: 90/10 (90% first mortgage, 10% down payment), 80/10/10, or an 80/15/5 (80% first mortgage, 15% second mortgage, 5% down). With good to decent credit we recommend an 85/10/5, 80/10/10, 80/15/5, or a 75/20/5. We can handle a standard simultaneous closing if the Experian-FICO score is higher than 595. Our programs and parameters do change so please check in with me occasionally to see if they have lowered their score requirements. Our minimum house value is $25,000, but we prefer $40,000 and above. Our minimum discounts begin at $2,500 with a $20,000 mortgage and increase with larger mortgages. We usually recommend that the seller use an interest rate between 10.5% and 12.5%. However, the seller and buyer can determine the interest rate and it would be fine with us. All quotes are wholesale, where the seller, homebuyer, or you pay all closing costs for an appraisal and title policy. We prefer that the homebuyer pay the closing costs.

INFORMATION NEEDED FOR A SIMULTANEOUS CLOSING QUOTE: We need to see a credit report (if available), a completed application (provided by us) and a cover sheet that lets us know the sale price and how much the buyer has for a down payment. Once we have an application, we can usually approve within 48 hours. Without an application we cannot provide an accurate quote that will hold firm. However, we will be glad to discuss hypotheticals with you. Once the buyer and seller accept the terms and quote, the seller signs a mortgage purchase agreement with us and a purchase and sale agreement with the buyer. Please make sure you understand that we are not giving anyone a loan.

ADDITIONAL SERVICES TO YOU: We are very aggressive when it comes to simultaneous closes and will be happy to assist you. There must be a valid transaction in the works and all parties must be just on the edge of a decision. Note: we will also buy the seconds that are created as a result of our strategies at a maximum of 35% of the face value. If we are to buy the second, then we will suggest the terms.

Note: Hanging on to second will allow you to use the installment sales ratio of reporting your gains which is a big help in reducing the tax bite. I have been using it since 1985.

Larry Potter, Pres.
Agile Funding Solutions

http://www.AgileFunding.com

LP2715@aol.com

Fax: 847 - 872 - 2681
Related link: Simultaneous Closings and Notes