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Mortgage Programs for Investment Property

Can Investors and Home Owners Get Lenders to Cover the Costs for Renovation and Closing Expenses?

 

Copyright © 2008 by Ralph Marcus Maupin, Jr.

 

The answer is YES! In fact, as a realtor and investor with over 20 years of experience, I personally suggest that all investors get mortgages that include the cost for rehabilitation. Look for mortgage companies with programs for investment properties because they will likely offer funds for rehab and renovation as part of the loan package. Some have programs where they set up escrows for rehabilitation and renovations and have inspections on the work in process in order to get the next draw.

Over the years I’ve encountered a vast number of lenders who have different rules and policies which is why we now add disclosures to all of our real estate purchase agreements. This assures buyers that we are using lenders with programs that work for them.

The following is an example of the disclosure language we use in our purchase agreements, addendums, assignments, and buyer broker agreements:

Lender and Title Company Restrictions. The buyer(s) and seller(s) agree that buyer(s) will disclose to buyer’s lender all relevant considerations regarding the purchase of this property. Due to the nature of this transaction, buyer(s) will only use a lender who allows a buyer to receive funds from the seller to cover allowable closing costs, permissible allowances and expenses of rehabilitation and renovation. This purchase agreement is void if buyers(s) and/or their choice of lender knowingly violate state or federal laws that govern this transaction. If found in violation of applicable law, buyer agrees to forfeit their good faith deposit.

Title Insurance Companies, as part of the services they perform, carry out the terms and conditions of the purchase agreement and any other relevant sales documents. They make sure that the purchase agreement and other documents you use in your real estate transactions are complying with what the lender, Title Insurance Company, and laws ask you to do. They review and check to make sure they put all charges on the HUD statement so the lender can see all expenses that are being paid at the closing. For example, the following should appear in the closing statements: commissions, rehabilitation and renovation escrows, builders allowance, wholesaler’s fees, and assignment fees.

If the Title Insurance Company does not place an expense on the HUD or other closing documents, ask them to amend their closing statements. If they cannot do so and/or if the closing must proceed as scheduled, then make sure all parties to the transactions sign off and are advised of the changes. It goes without saying the mortgage company must be advised of the omissions by the Title Insurance Company.

Ralph Marcus Maupin, Jr. Nick Name ‘Mark’ is one of founders of National Real Estate Network LLC. He teaches real estate investing and Internet Marketing for a local Michigan College. You will find many free resources such as: Free Real Estate Forms, Terms, Articles and Real Estate Investor Clubs Locations at http://MegaEveningEvent.com. For low cost Michigan Real Estate Investing CDs, DVDs, forms and E-books go to http://stores.ebay.com/Real-Estate-Investing-Guide

 



 
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