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Article by Scott Rister
Getting Past The New FHA Lending Guidelines

  Well, by now unless you've had your head under a rock in the last couple of months you'll know that FHA lending has made it more difficult in some ways for those ethically making money in real estate. Basically here is what it boils down to: consecutive chain of title for six months for FHA lending.

  Just what exactly is wrong with that when you're talking in the realm of creative real estate? Well, when you're retailing a property and haven't had title in your name at least six months ...YOU CAN'T DO AN FHA DEAL! Talk about grief for those making a living primarily retailing houses.

  I mean, who really wants to and much less afford to carry a property for six months before shopping it around for FHA buyers? Especially when you're using hard money lenders at double digit interest rates those payments going out and money not coming back in gets old real quick. In the game of real estate its all about cashflow and for those of you who haven't figured it out yet, its POSITIVE cashflow we're seeking as investors.

  So why FHA lending some may ask? Well, low down payments and better pool of quality buyers is the main reason. It use to be that once you got a qualified FHA buyer lined up that wants to buy your property and the FHA appraisal has been done, then its time to start counting the cashola! But for those of us conducting our real estate business ethically, it's a bummer now that others have caused the rain on the parade.

  How did this all come about? Well, there are a number of unscrupulous investors that have put the bind on many of us retailers. See, there have been scams in many cities including mine where the whole line of a real estate transaction are involved: lender, buyer, seller, appraiser, etc... Inflated appraisals starting the root of the problem with unethical sellers. The end result are properties that when either are tried to be resold or worse, foreclosed on the lender takes the property back only to find out the whole thing was a sham and they're now owning a property taken back that is only worth 50-70% of what they thought it was. The lender you ask? FHA and this is not good. Don't mess with the government's money as this can be bad news as many in jail have found out!

  So, enough for the negativity of the situation and how about some rays of sunshine. What are most of the alternatives if you want to retail properties but haven't had chain of title in your name (company name) longer than six months?

  1. Use Conventional Financing
  2. Create A Note An Sell To Note Buyer

  Conventional financing is simply not of the FHA variety obviously. Working with a quality mortgage broker is of critical importance. You need to have affiliations with mortgage brokers that KNOW what you're needing to accomplish in your real estate business. The answer you want to hear is available and that is there are lenders (non-FHA) that will lend on chain of title held less than six months----SHOP AROUND!!!

  Another alternative is creating a note and selling the note to a note buyer. This technique is not as complicated as it sounds and basically here is how it goes.....when you create a note, a note buyer will purchase it for a discount of the face value which is usually for 85-90%. Sometimes you may have to "season" the note for a payment or two and its still a possibility of doing a simultaneous close and funding your profit that day. It all depends upon the note buyer's requirements and how much they pay depends upon the strength of the borrower, their credit, terms of the note, etc... Be sure you get ALL the specifics from the note buyer before proceeding on this technique.

  What it all boils down to is that it has a ripple effect all the way down the line in many investment parameters including Realtors, wholesalers, and retailers. For me personally it hasn't effected as much on the wholesaling side as with investors buying on the 50-70% LTV are using hard money and local bank financing that they buy/hold any way.

  Just know that the name of the game is cashflow and this means as an investor you just don't sit and wait out 6-month period for FHA financing. Get creative, ask around, see what others are doing in your local RE market and be get refine your money machine so you're flexible to change with the times.

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  Take a quick check of your marketing program and tune it up if needed so you too can, "Find All The Motivated Sellers You Can Handle!".

Visit Scott Rister's Wholesaling and Marketing Forum

Scott Rister is an author and "real world" investor just like yourself. Scott started investing in real estate over seven years ago for the sole reason so many do which is to supplement income and eventually replace the corporate job. After learning first hand what "down-sizing" in the corporate world means, Scott focused more intently on shifting from emphasis from buying techniques to finding truly motivated sellers. In less than a year Scott has been involved with over 60 real estate transactions that ended up with a check with his name on it. You can learn more about his program at
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