Hey Guys!
I got pre-approval in December but could not close the deal and now I applied for another pre-approval last week for new construction that I found but it will probably close by august or September. That means my credit score will be hurt three times. I just want to know how long it take for my credit score to get up and if there is a way to get my credit score to bounce back up quickly.
Thanks in advance!
With Dodd Frank, you can apply to more than one lender in the first 30-45 days and only hit your credit score once. Many of us do credit repair at little/no cost and I would recommend you apply to a second lender who can help. With the modeling, we can put in assumptions and duration and model with a percentage likelihood what your score would be. We can also discuss with you potential improvements to help.
I am honestly a little surprised your lender didn't do this lenders want you to be successful. It is better for you to get a great score, lower cost and give me a referral later. I am happy to take a look if you want and you only have to pay for the credit pull. Good luck with purchase!
In my limited experience, lenders predominately offer the same thing (though I could be wrong about that). What would you recommend looking out for (characteristics, credentials, etc. they should or shouldn't have)? I've had casual conversations with a few different mortgage lenders and brokers, but when it comes time to pull the trigger I'm not sure how to pick who I work with. Any advice? Thanks in advance.
I would look for referrals. At the end of the day, we can all mostly do the same things. There are some exceptions in that we might offer a different program that benefits you. However, you need to have a deep trust in this professional to make yourself successful.
Find a professional you like and trust, maybe get a backup or two, but find and ride that horse as they will help represent you for your benefit. Also, know your lending channels: retail, depository, correspondent, wholesale. They are different and all have pros and cons.
My wife and I have been able to do complete rehabs for under 12k per door. The key to our success is to not view the property as our own home . We do not go above and beyond and keep expenses to the minimum. We buy everything 2nd hand. We’ll purchase kitchen cabinets off Facebook market place, water heaters, appliances, and etc. Our building materials we buy from retail discount stores that purchase Home Depot/lowes returns by the trailer loads. Most items have small imperfections that a home owner wouldn’t want but for a rental property they are perfect! An exterior door that has a dent or scratch for 100$ vs 500-1000+, a bathroom vanity that has a crack on the backside for 50$ vs 500$, and so on. We’ve been able to purchase 32 doors in 2 years with no private money following the brrrrr method and doing everything ourselves. I am now a licensed insured home inspector/contractor that can redo plumbing to wire up electrical panels and etc and currently becoming hvac certified. YouTube is a powerful resource to learn everything.
I personally just switched over to Hilton Business, but no science to it ... just wanted to hit the Maldives with an overwater cabin. :) I am not sure there is a good plan, it really depends on what you want. JMO
Since the banking business is not my strong suit, would someone please explain something to me?
The Govt (specifically Biden and Yellen) is saying that all deposits will be covered. ALL. That means even those above the $250,000 limit right? "All depositors will be made whole" they say.....
Then they say that taxpayer dollars will not be used and that the Banks will pay this. "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks"
Who do they think will actually pay this 'special assessment'? The banks or their customers...businesses will always pass down extra costs to their customers as far as my lifetime experience is concerned.
Am I missing something here?
FDIC has assets to cover something like 2% of the total US deposits, but they guaranteed all of them for the short run. FDIC is funded by bank fees, not taxpayers. Of course, the banks will just charge customers more fees ... but I guess that doesn't count in the eyes of Biden/Yellen. The goal was to prevent additional bank runs, but no they don't have the money to cover it. The only way that I know where the government can keep that promise will be another QE.
Good news is that I don't think it will be needed IMO. The losses on these bonds are more like 10-15% on the dollar if a bank goes under, not 100%. Also, if rates come down slightly then the losses go down as well. The Fed is in control of the balance sheet now it appears.
Now, how do you unwind the new moral hazard created is the next question along with what is the action of the Fed regarding rates?
The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.
Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.
When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.
Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.
In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.
As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.
In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.
Hello, the SVB doesnt make risky investment, they only purchase MBS bonds in 2020, but the gov. choose to crash those bonds.
I bet it's Powell intended consequence to rise the rate that high that fast for nothing.
nobody questioning powell LOL
But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens.
So would you basically write up a contract that includes an amortization schedule and essentially says "here is what my first and second years' interest is expected to be based on my current financing terms and I want you to front me the money for 2% in year one and 1% in year two'?
Yes. For simplicity's sake, let's say 1 point equals 1 percentage point on this debt. You pay 3 points up front when closing in points (2 points for year 1 and 1 point on year 2) and modify the note rate. So, if your 30-year rate was 6.5%, then your year 1 rate is 4.5% and year 2 is 5.5% then 3-30 remains at 6.5% for the term.
Basically, the lender moves the cost into the front of the loan to reduce the payment for the first 2 years. It is good if you are cash flush but want monthly cost down for the first 2 years. Very popular when combined with seller concessions to cover the cost in some markets. Hope that makes sense.
So, I've come across 2-1- rate buydowns a few times recently. I understand the general concept of it don't really understand the mechanics of how it works. I was hoping someone could explain how you work this into a contract and how it actually works.
Thanks in advance.
Christopher Woodland
It is prepaid interest. You are basically going to pay points directly or through seller credit to artificially lower the note rate 2% in year 1 and 1% in year 2. I don't push them because the ROI doesn't always work out for customers. I think the situation where it makes sense if you plan to:
- Refinance in the next few years and have seller credit available to offset the cost or
- You have a life change coming and want to keep the payment lower while your lifestyle catches up to your payment. An example of that might be your spouse is finishing school or you are starting up a business and want the cost low while you ramp it up, etc.
Hope that helps. I haven't sold any and normally move people to longer term solutions in the conversation.
Commercial depositors spreading their large deposit accounts across hundreds or thousands of banks is a nonstarter.
Agreed thinking that business's should only keep 250k in each bank is ridiculous statement on so many levels. What about companies that have payrolls of millions a month they going to have 25 separate banks to deal with ?? And Should syndicators and other investors that are pooling money for a deal and say are raising 5 million in cash they should go out and get 20 separate accounts.. Growing up in Cupertino ( Silicon Valley) Always thought SVB to be a good institution catering to high tech. Maybe they needed more real estate loans tied to prime on their books..
so SVB business model is bit different, they have special loan program for the tech/startup founder but the rule is that they have to invest in SVB.
This problem actually happened because Peter Thiel is saying to everyone in VC world that they should withdraw their fund from SVB.
Btw last time I checked all the big VC has large $$$ in SVB, I guess we will see catastropic changes in bay area in next few month. If bank and Gov cant be trusted what can we do :) lol
The thing is most of the "deposit" in SVB is "corporation" account, for example payroll account.
Guy in roblox and roku can't be paid because thei bank is gone after stupid goverment action :-) even the SVB CEO is not at fault here....
SVB leadership is partially at fault (along with the Fed). SVB put a large portion of their assets in long term instruments like treasuries and MBS. One of those instruments in MBS was declining in value because of the Fed raising rates which was public knowledge. Sure it is a paper loss that doesn't even have to be recognized if they hold the paper for 10 years or more, but clearly their liquidity mix was incorrectly calculated. Their leadership had two issues:
- How they allocated capital (this is just stupid, but not criminal)
- The lunacy of doing things like selling stock and paying large bonuses days and hours in some instances before the Feds took over (I hope they go to jail for this as it was likely criminal)
Now the question will be the long term changes in banking with the Fed. They blew a hole in FDIC insurance now as they backstopped all deposits, not insured deposits, to quell a bank run. What is the new moral hazard created by the Fed for banks now that they will feel ALL deposits are guaranteed going forward? It would seem that banks are impowered to take on more risk knowing they have a larger backstop. If the Fed doesn't clearly make its actual policy actions known for future events, they have increased risk in the market over the long term IMO.
they are not at fault.
The whole US bank this time has 620 billion unrealized losses because the gov. is intentionally crashing their bond value by increasing the rate.
It's powell mistake.
This is why, outside US banking system, 30 year fixed rate mortgage is non existant, because the bank is taking too much risk from holding people debt.
So I agree with you about Thiel (our own company yanked out Thursday also). And that caused a lot of pain and the failure. But SVB is partially at fault for being stupid in how thye setup laddering on their treasuries. The timeline for maturity should have been much better.
Ultimately though people need ot be more concerned about how Thiel essentially caused a viral panic. Also since SVB went down the number of posts/discussions on social/reddit about removing money from their bank has skyrocketed. My concern is panic in the masses who have no understanding of what is going on.
all these VC guys are just bunch of FOMO guy as well, they would invest to one product/company at a time and withdraw as FOMO as well, there's no diversification for those VC although they seems smart from outside, this is also why you see so many "unicorn" list during cheap money era and those list evaporated during high rate lol
So the problem with SVB is not SVB specific, all banks do the same, they would buy MBS in last 10 years as those are the only gov. backed up asset that has little bit of interest.
Now ask Mr Powell why they print 40% more dollar into the circulation in April 2000 (Fauci effect) and when he realized the mistake for too long, everyone (bank,private sector,individual) has unrealized loss (from MBS,investment,etc). Gov. can still survive the unrealized loss because they can play with the accounting books and ability to print money , while private sector can't do the same, they would just bite the losses....
The moral dilemma is with Mr. Powell not with SVB CEO.
I don't think that is correct. From the article I linked above (why SVB is unique):
When interest rates were at zero, tech start-ups could promise to spend years building AI/machine learning/flying taxis/robots to take care of the elderly and then make a lot of money far in the future, and that was an attractive business proposition. When interest rates rose, a dollar today became better than a dollar tomorrow, and so investors started demanding cash flows. As the Fed hiked rates, the cash being thrown at tech start-ups dried up.
Instead, tech firms had to take their money out of the bank to pay for rent and salaries. SVB’s deposit base fell significantly over the course of 2022. Instead of having its assets tied up in loans (which broadly tend to have floating exchange rates and shorter terms), SVB held bonds (which broadly tend to have fixed interest rates and longer terms). Fixed-rate securities accounted for 56 per cent of SVB’s assets, compared with 25 per cent at Fifth Third and 28 per cent at Bank of America. The average maturity of SVB hold-to-maturity bonds was 6.2 years at the end of 2022.
To redeem client’s deposits, SVB had to sell assets at a big loss. As clients worried about the stability of SVB, they rushed to yank their own deposits, starting a bank run. Unrealized losses snowballed and “completely subsumed the $11.8 billion of tangible common equity that supported the bank’s balance sheet,” meaning that SVB was technically insolvent. The California Department of Financial Protection and Innovation took possession of SVB and appointed the FDIC as receiver, citing inadequate liquidity and insolvency.
The other thing that was unique to them, and I haven't seen a good summary of it, was that they offered unique lending and/or platforms to IPO's which is why they sucked in all of those investments. However, they added a stipulation that you had to keep the deposits at SVB to qualify. I think more information comes out later and is possibly one of the reasons so many business kept so much capital there.
Powell and the Fed are definitely a huge part of this issue, but not the only part.
Commercial depositors spreading their large deposit accounts across hundreds or thousands of banks is a nonstarter.
Agreed thinking that business's should only keep 250k in each bank is ridiculous statement on so many levels. What about companies that have payrolls of millions a month they going to have 25 separate banks to deal with ?? And Should syndicators and other investors that are pooling money for a deal and say are raising 5 million in cash they should go out and get 20 separate accounts.. Growing up in Cupertino ( Silicon Valley) Always thought SVB to be a good institution catering to high tech. Maybe they needed more real estate loans tied to prime on their books..
so SVB business model is bit different, they have special loan program for the tech/startup founder but the rule is that they have to invest in SVB.
This problem actually happened because Peter Thiel is saying to everyone in VC world that they should withdraw their fund from SVB.
Btw last time I checked all the big VC has large $$$ in SVB, I guess we will see catastropic changes in bay area in next few month. If bank and Gov cant be trusted what can we do :) lol
The thing is most of the "deposit" in SVB is "corporation" account, for example payroll account.
Guy in roblox and roku can't be paid because thei bank is gone after stupid goverment action :-) even the SVB CEO is not at fault here....
SVB leadership is partially at fault (along with the Fed). SVB put a large portion of their assets in long term instruments like treasuries and MBS. One of those instruments in MBS was declining in value because of the Fed raising rates which was public knowledge. Sure it is a paper loss that doesn't even have to be recognized if they hold the paper for 10 years or more, but clearly their liquidity mix was incorrectly calculated. Their leadership had two issues:
- How they allocated capital (this is just stupid, but not criminal)
- The lunacy of doing things like selling stock and paying large bonuses days and hours in some instances before the Feds took over (I hope they go to jail for this as it was likely criminal)
Now the question will be the long term changes in banking with the Fed. They blew a hole in FDIC insurance now as they backstopped all deposits, not insured deposits, to quell a bank run. What is the new moral hazard created by the Fed for banks now that they will feel ALL deposits are guaranteed going forward? It would seem that banks are impowered to take on more risk knowing they have a larger backstop. If the Fed doesn't clearly make its actual policy actions known for future events, they have increased risk in the market over the long term IMO.
they are not at fault.
The whole US bank this time has 620 billion unrealized losses because the gov. is intentionally crashing their bond value by increasing the rate.
It's powell mistake.
This is why, outside US banking system, 30 year fixed rate mortgage is non existant, because the bank is taking too much risk from holding people debt.
SVB links:
This is insider trading and possibly criminal behavior: https://www.thestreet.com/tech...
This is their liquidity issue is documented here which is poor management and not the industry norm: https://www.kroll.com/en/insig...