by Dave Shanklin
Over the years, I have noted several helpful procedures that make our loan processing smoother. In the past I have written on this topic. Here are some new tips to help our industry.
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When sending your buyers to community management for the approval process and initial interview, try to go with them every time. Frequently, misunderstandings occur between management personnel and the buyers. One thing to worry about is the possibility that management may have park-owned homes that they might try to sell to your buyer, cutting you out of the picture completely. If you don’t go with them, you can sometimes lose control of the transaction right from the start.
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Determine right away if your buyer has any mortgage defaults in their history, such as foreclosures or short sales. Our industry’s lenders still have a very hard-nosed approach to these issues. Frequently buyers have been pre-qualified for FHA or other financing with recent mortgage defaults and they assume that they can finance a manufactured home in a manufactured home community or mobile home park. Find this out straightaway and advise the loan agent so a plan of action can be crafted. Occasionally, if the mortgage default is several years in the past, and if the default is the result of death of a spouse or was medically-related, then there might be a slight chance of getting loan approval case-by-case. When the sale is a listing, it’s common for the agent to tell the seller that they have a buyer and the seller gets their hopes up, but the next day the deal crashes when the loan officer finds out about the recent mortgage default.
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Determine the amount of the down payment and more importantly the source of the down payment in your initial conversation with the buyer. Our industry’s major lender out of Seattle has recently relaxed documentation requirements slightly when down payment funds are being gifted from family members. It’s important to advise the buyer that, if Aunt Minnie is chipping in $5,000 to help with the down payment, she will need to sign a gift letter. Other lenders might require proof that Aunt Minnie has the funds in her account, and bank statements from Aunt Minnie proving transference of the funds to the gift recipient. Documentation requirements along these lines can vary from lender to lender, and underwriter to underwriter. Advise the buyer that the gift provider will need to cooperate. They will be, at least, a minor party to the transaction. It is the lender’s right to know where the down payment funds come from. The entire down payment must be absolutely free and clear of any additional indebtedness. The down payment must be true equity.
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Tax Refunds May be Used for the Down Payment. If down payment funds are coming from a refund anticipation loan, or “instant refund” during tax season, then the lender will require proof that the refund anticipation loan has been paid in full as the result of the tax refund being disbursed by the IRS. Instant refunds are not refunds. They are loans. Our industry’s lenders have always had a zero tolerance policy toward borrowed funds being used for down payment purposes. The funding of the MH purchase loan can be delayed until the actual refund has been sent from the IRS to the finance company that bankrolled the instant refund. This is a common issue during tax season.
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Find out if your buyer has qualifying income. This is crucial, not only for community management to clear, but also for the loan. Amidst the recession, there are massive numbers of buyers receiving unemployment income, or have been on unemployment recently. Our industry’s lenders used to have a zero tolerance policy toward any unemployment bouts within the past 24 months of applying for a loan. However, due to the recession, our lenders have greatly relaxed this rule. Loan approvals are now very possible with unemployment periods, as long as the applicant is currently employed and their credit didn’t go sour during the unemployment period.
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CO-SIGNERS. If Aunt Minnie is being asked to co-sign for your buyers, then Aunt Minnie will be totally under the microscope. Our industry’s major lender out of Florida has recently modified their guidelines pertaining to co-signers. This lender will consider immediate family members as co-signers under certain circumstances. If the non-qualifying borrower has weak credit or no credit, then an immediate family member with stellar credit and high income may be used as a co-signer. The REALLY good news is this lender will sometimes approve this scenario with only 10% down. In the past, IF you could pull this off, you needed 20 – 50 % down. If the non-qualifying buyer has bad credit then don’t get your hopes up. If your buyer says “I have a co-signer,” find out if the co-signer is a homeowner, has stellar credit, and high income. You’ll need to clear these hurdles right away in order to push through a co-signer loan application.
Follow these 6 steps routinely, and you will get more deals you start across the finish line of financing! ##
