Financing a Tough File
As a broker, the familiar sinking feeling when you see THAT kind of appraisal or credit score is all too real. You just know this is going to be a tough file.
Problem properties and tough files come in all shapes and sizes. Common causes for problems are credit score issues, grow-op houses, and hoarder homes, to name a few. You may see these files and think to yourself, “there is no way a tough file like this can be financed.”
But behind every tough file are real people with real stories and each with their own reasons of how or why they’re in the situations they’re in.
As alternative lenders, we need and want to hear these stories so we can get the full story. We know, things are not always as they seem.
For instance, if the Credit Score is low, find out why:
- Are there errors in the credit report?
- Could the issues be chronic? Or was it a one-time event that caused the problem?
- Are payments typically being made on time? If not, is it related to how the borrower gets paid (occasional lump sums vs regular salary)?
- Does it relate to payments on a personal guarantee of someone else’s debt?
If the property shows evidence of being a grow-op then we can still often finance the purchaser. If it was remediated, be sure to obtain copies of the permits and certificates showing that all of the required work was completed.
And if the pictures in the appraisal suggest there are issues like a hoarding situation for example, be sure to get the back story.
For instance:
- Is the borrower getting the help they need?
- What is the LTV, if it’s low enough then less weight may be given to the condition of the home.
- Will a new mortgage actually help the borrower or will it be just be postponing the inevitable?
The team at Kokanee Mortgage is always looking to find creative ways get the deal closed in the face of obstacles. If you have a deal with unique challenges, call us for help.
