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HOME BUYERS TURNED DOWN BY THE BANKS: WHAT TO DO

Buying a home when you’ve been told you can’t is a difficult endeavor. However, there’s a reason to be optimistic. Many home buyers are able to buy a house by structuring a complex deal that will be discussed in this article.

To help home buyers own a home, as long as they have a good down payment, we can typically find someone to put them in a loan with.

Why home buyers are being turned down by the banks?

Prices actually had fallen by over 50%. The banks had reduced the commission they were paying and they were requiring us to do repairs.

Looking back at the end of 2012, when the market was just starting to recover, the prices were starting to come back. People were getting back on their feet and succeeding. However, we found that a good percentage of our clients could no longer qualify for a loan at the bank. And as a matter of fact, in October of 2018, all the loans in the United States that were applied for, 29% of the people have turned away still.

The bottom line is that this model isn’t working anymore. Banks are the only people that could afford to sell when everyone’s lost 50% of their market value.

1 of 3 people cannot qualify and even over half the real estate agents in this country cannot buy a home, because of the banks. It’s not that they’re bad people or they don’t necessarily have bank credit. It’s that they make their money in spurts. They don’t make it in W2 every two-week paycheck. And that is what the banks are looking for because they’re selling all their loans.

To help home buyers that have been turned down by the banks, we can typically find someone to put them in a loan with as long as they have a good down payment.

Where these types of home buyers came from?

Self-employed business people are the ones that we actively seek. We put up signs down in the industrial parts of the city, by the roofing supply store, the plumbing supply store in the electrical supply store.

These people basically aren’t looking for a home on the MLS because they’ve been told they can’t have one. So we educate them with a bandit sign that basically says, “Hey, Own for cheaper than rent“. That’s where the majority of the home buyers come from.

How to structure the Deal for the home buyers?

If you are one of this type of home buyers, we would simply ask where you live, how much you pay in rent and how much money you have for a down payment. If you have at least 10 to 15% down, we will find a loan to help you qualify with a licensed lender. We get a copy of your credit report and structure the deal.

Address

Market value

30-day market value of the home

Offer Price

Down Payment

Insurance Taxes

HOA dues

what the buyer would pay in rent

Income Tax Bracket

Market Appreciation

Using these 10 pieces of information above, we’ll produce a report for that basically shows them what their total payment is for the first and the first and second loan if they buy a home.

The home buyers typically save between a hundred and $200 a month from what they’re currently paying right now in rent.

We also inform our home buyers that they are able to deduct the mortgage interest and the property tax. Also, they pay down every month the principal, so it’s being paid off. Any appreciation that occurs in the market belongs to them instead of their landlord.

Check this out: How to Secure the Best Financing Rates When Buying a Home in Palm Beach or Broward County

They will actually end up saving almost $300 a month and we target the lower-priced homes in the area. It works best on the low priced homes because the rent is high compared to the price.

Typically, a single family homes with 3 bedrooms, 2 baths would rent around $1,100 a month. We can offer a buyer a home with a monthly payment of just under a thousand dollars.

THE PROCESS

1. Get one-third of buyers that had been turned down by a variety of banks or lenders or loan originator.

2. Find sellers that don’t want to put their stuff necessarily on the market or anything else and offer to sell their home for 10% more than what other homes are selling for and put it together.

There’s a shortage of inventory all over the United States. It’s gold when you can actually offer to a seller.

Instead of saying, “Hey, I’m a real estate agent, I’d like to list your property”. You say, “what if I could find you a buyer that would pay you $10,000 more?“

Most sellers actually hire an agent that promises them the highest price. The only difference is we actually have a way to get a higher price more than what the market would typically pay.

And that’s often the case, home buyers that can’t get a loan at the bank are very willing to pay a higher price.

If you aren’t going to get your money back for 30 years, will it buy as many groceries when it comes back? That’s very easy to explain to the home buyers and then when you show them the benefit that they are going to get back $105 in income tax that they not getting back right now, they’re going to save $131 in rent. Every month just those two alone are $236 that’s real money next month in your paycheck that’s leftover.

In addition to that, you’re paying down principal, which starts in the first month at $78 and then if and this is on $100,000 home example, and the appreciation at 3% a year would be $250 a month. So that’s 328 in equity that you’re gaining in 236 in cash for a total of $565 how much of your rent are you going to get back?

Does it take a lot of work? No, it’s far less work.

Instead of buyers agents are writing 10 offers to get one accepted because of the bidding wars and the shortage of inventory, we basically go out and show a buyer two homes and ask them which one they want to write an offer on. The sellers are predisposed to take that offer because our buyers don’t go through a traditional bank.

And some of our buyer’s are not asking for 3% in closing costs they are paying their own closing costs, our sellers are saving 3% in buyer closing costs because of our closing costs for a buyer or about $500. Also, because they’re in the trades, they very rarely ask for any repairs.

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, our system forwards the home buyer’s information to a certified mortgage professional. Our recommended professionals can assist you in locating the best mortgage rate and lowest closing costs possible when you buy a home.

So compare that to like an FHA buyer that is coming in with, with very little down. It’s taking every dime they have saved they’ve never owned a home before and they’re scared and they’re asking for a laundry list of repairs.

Our buyers come and say, “I’ll take it the way it is. I don’t want anything. I’ll pay my own closing costs and I’ll close in two weeks.”

And there are sellers also, you go to the seller and you say, “Let me ask you a few questions. Do you want a fast sale or an easy sale? When I, when I sell your home, do you want the process to be fast or slow?” And of course, they say fast. “Do you want the negotiation to be hard or easy?” Well, they say easy. “And do you want more money or less money?” And of course, they all say more. So then I just say, “Well, what you’ve described is a seller finance transaction”. And I can close faster for more money with the least amount of hassle.

If the seller doesn’t want to qualify or carry the loan, we find somebody else to carry it for them.

That’s where retirees come in. These people have their money sitting in banks at $100,000 and 0.2% interest or a total of $200 a year. Which is $16.65 cents a month.

Well, that same $100,000 invested in a first position loan at 70 or 75% loan would get that investor or that retiree, not $16 but $665 a month.

So let’s just use this example. If we could sell the house in 30 days for $100,000, that’s the 30-day market value we could get in this low supply market. If I got $115,000 for that home, the buyer would put down a minimum of $15,000. So that would mean that there’s $100,000 left to be financed.

What we would do in this situation is that just say the retiree funded $75,000 of that, and then there’s another loan, a second position loan behind the retiree for another $25,000. We do that to keep that retiree secure. We often take that second position loan, because we are equipped to actually buy that home.

What if the home buyer’s don’t pay?

Well, here’s what happens first. That person would lose their $15,000 cash. The second thing that would happen is I’m behind in position. I would have to lose all of my $25,000 before you lose interest in your $75,000. So what other investments do you have where two people need to be totally annihilated before you lose the interest on your money?

If they give everybody at some time in their life where they’re going to get in a car wreck, they’re going to become ill and they’re going to be short on money. They look out the window and think, this is why it’s so important to make the total payment that they’re paying on the home. Because their alternative is to not pay you and to move across the street and pay someone else more.

That’s what keeps them paying.

Not only would they lose all their down payment, but they would also have to pay someone else more. So that’s what I believe are the two things that make this such a success, and these people are getting equity and especially in a, in a rising market. The people that we finance five years ago are starting to sell their homes. They’re walking away with $30,000-$50,000 worth of equity, that the market has given to them in two ways. One in appreciation. The second thing is in principal pay down because it is a fully amortized loan.

So it’s just really we’re finding buyers who can’t buy. We’re finding sellers who can’t sell and we’re finding retirees who can’t afford to live on the money that the bank is paying to them.

Conclusion

Check your savings to see if you have extra money for a larger down payment. Saving up for a good amount for a down payment can increase your chances of buying a house if you have been turned down by banks.

As a first-time home buyer, you may also want to read this: Homeownership and the true cost of homeownership

Stay optimistic, lots of people have been able to buy a house, you can too.

Many people ask the same question.

How to own a home after being turned down by the banks?

While it’s not an easy task, it’s not impossible. There may be other options if you have been turned down by banks. Call us at 561-500-5747 to go over all potential options.

Each month, we publish a series of articles of interest to home buyers and homeowners in South Florida– money-saving tips, household safety checklists, home improvement advice, real estate insider secrets, etc. Whether you currently are in the market for a new home in South Florida, or not, we hope that this information is of value to you. Please feel free to pass these articles on to your family and friends.

The Stampini Team

, we’re happy to answer any questions you have about buying and selling in the South Florida area.

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