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Enhance
your Credit, Debt to Income Ratio and Reserves
Objective:
The
objective behind the “Credit and DTR Enhancement Process” is to
place you at an “Optimum” lending level (Credit Score, Debt to Income
Ratio, Appearance of Profitability, and Liquid Reserves), while
operating your Real Estate Investment Business. Remember…. Investing is
opportunity driven. You don’t want to hurry to achieve a “Top Tier” and
especially a “Lendable” level when you’ve already contracted a home to
close within 30-days. That places undue stress on you, your lending
staff, contradicts the concept of proper planning, and it is not
becoming of a sound relationship or a well run Real Estate Investment
Business. "Get all of your ducks in order now so when a property become
available, it's as simple as faxing us a contract, and searching for the
next great deal"
•
Capital Reserves
/ Qualifying Assets
In today's mainstream conventional and 100%
lending sectors, ALL investors are required to maintain adequate
reserves before a loan can be funded. In most cases 6-months of PITI
(Principal, Interest, Taxes & Insurance) is required in addition to the
funds needed to close your transaction (Down Payment, Closing Costs &
Prepaids). In some cases, especially with less than ideal performing
properties purchased for speculative purposes, or investors will minimal
Real Estate Investment or Property Management experiences, as much as
12-months of PITI reserves may be required.
Progressive will provide for 100% financing and will
help you structure your transaction to include a seller’s closing cost
concession, and in some cases, even additional concessions to cover your prepaids (1-year insurance policy, interim interest, escrows), however
that still leaves the “Reserve Requirement”. If your total PITI payment
is $1,000 per month, the reserve requirement can easily reach the
$6,000; or even $12,000 mark. While most of our Real Estate Investor
Clients easily meet the reserve requirement on each transaction, this
can prove as a challenge to the new Real Estate Investor entering the
game.
By maintaining an unmatched understanding of
the rules and how to manipulate or even circumvent the requirements in
concert with sound preparation, the new Real Estate Investor with
limited capital can still press forward with their first few
transactions. Again, this is where our EXPERIENCE plays a most
instrumental role.
Our initial process will cover a complete
analysis of your liquid assets and equity holdings, including the money
hidden in your mattress or in a shoebox in your closet. We will teach
you how to properly safe keep your liquids assets while at the same
time, documenting such that is acceptable to your financing source. In
addition, we will provide you with tools that can easily convert your
equity in your holdings (Primary residence and other investment
properties) to liquid cash or reserves at a moments notice. This
vehicle is a 100% Equity Line of Credit available on a
“Stated Income” and “Full Document” basis.
This tool is your back-up contingency plan, and
should only be used to address interim transaction costs such as, third
party reports (Appraisal, Inspections, Surveys, Escrow Deposits, etc.);
project costs (renovation, material, marketing) and interim investment
capital (Large escrow deposits – foreclosures, foreclosure bailouts,
immediate acquisitions, etc.). This vehicle will also serve a purpose
of meeting your “Reserve” requirement when needed.
The staff at Progressive will coach you on the proper
usage of your HELOC, and how to utilize such in a way where you
accomplish the task on hand, and at the same time avoid unnecessary
reductions to your scores and overall lendability.
In addition; in time we will teach our
“Relationship’ based clients how to effectively build and manage large
reserve accounts by using OPM (Other people’s money). Imagine
financing your acquisitions at 100% and funding your business’s daily
operating needs using “Other people’s money”!
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