NEW OPTIONS FOR LUXURY FINANCINGCustomized underwriting can address unique wealth management scenarios

Real estate is arguably as complex as it has ever been in history. Even traditional buying and selling scenarios— once considered an average real estate transaction—have become increasingly complex and sometimes cumbersome.

The conditions of today’s economy are exacerbated for luxury consumers dealing with specialized scenarios in their real estate and financing goals. Given that real estate is considered by many to be a wise and valuable component of their complete wealth management strategy, working with market experts who know how to manage unique real estate scenarios is more important than ever.

UNIQUE FINANCING CONDITIONSWith mortgage rates at historic lows and home pricing that has moderated throughout the Mid-Atlantic region, there are opportunities in today’s real estate market unlike any we’ve seen in generations. Some affluent buyers are taking advantage of the chance to acquire their dream properties, while others are seeing the potential value that investment properties, if managed well, can add to their financial portfolios.

Still, affluent buyers often bring to the table more complex scenarios when it comes to financing. Business owners may face hurdles in documenting complex self-employment income and wealthy consumers who are retired may look to meet income requirements based on their assets. These and other non-conforming financing scenarios are likely to require the skills of a loan officer or private banker with experience in this realm, but the good news is that products are available in today’s market to address the needs of affluent consumers.

HURDLES CAN BE OVERCOMEWhile every financing situation is different, there are some notable examples of non-conforming loan scenarios that highlight the ways in which luxury buyers can accomplish their financing goals while staying on track with their overall investment and wealth management strategies.

Some common examples of hurdles we see for high-end buyers in the mortgage industry include:

Asset QualificationThere are many reasons why a high-net-worth individual may not have income reflected on last year’s income tax returns. Perhaps a person with substantial assets is no longer working, or has started a new business in the last year that is not yet showing a profit. Income requirements can often be addressed with a program that will allow qualification based on assets.

Guaranteed Bonus IncomeIn traditional loan programs, first-year guaranteed bonuses for new jobs—a signing bonus for a lawyer, for example—may not aid in qualifying buyers. But these types of bonuses can be sizeable and they are often used, in whole or in part, for the purchase of a residence.

Business OwnersOwning a business, even if it is successful, can create some challenges when it comes to obtaining financing in today’s environment. With the right mortgage program, however, buyers can look at

alternative ways to guarantee a loan, including the possibility of using business funds for down payment and reserves, and increased opportunities for LLC-vested and 1030 exchange transactions.

Departure Residence PolicyFor executives who transfer or other affluent clients who move and have not yet sold their previous homes, a more flexible departure residence policy may provide exemptions to obtain a new home before the other property has sold.

Jumbo Financing NeedsFor those who are seeking financing in excess of $2 million, traditional loan programs may not be dealing with the specific needs of clients in this realm. Lenders who specialize in loans above $2 million—and who reach, in our case, as high as $20 million—are often better-equipped to manage the complexities of financing products to suit these requirements.

TAILORED FINANCING SOLUTIONSMortgage professionals who are trained and experienced in the luxury market are likely to be able to help affluent consumers reach their homeownership goals—regardless of the often-cited requirements of conforming loans.

For example, Prosperity Mortgage Company, The Long & Foster Companies’ joint venture with Wells Fargo, has recently introduced new financing programs customized to affluent clients. With innovative financing solutions such as its Renovation Revolution program targeted to distressed properties in need of significant renovation, Prosperity has remained agile and proactive in order to cater to the needs of today’s luxury home buyers.

Prosperity has also launched a new program catering to affluent customers and some of these complicated financing considerations that can sometimes come with luxury home purchases. Through this luxury purchase program, qualified clients benefit from the experience of highly-trained Private Mortgage Bankers who are experts at complicated and complex financing arrangements.

CHOOSE YOUR PARTNERS WISELYWith swiftly-moving housing market dynamics, it’s more important than ever to partner with the right team of real estate and financing professionals. Working with the right mortgage company is no longer about simply getting approved with the right interest rate. Today, partnering for success will not only provide you with the financing solutions you require, but it will also bring to the table the flexibility you need to help you reach your long-term homeownership and investment goals.

BUILDING RELATIONSHIPS

While many specialized mortgage needs can be addressed with non-conforming loan programs, even more complex scenarios can be addressed with relationship-based programs, in which customized solutions can be developed. If a luxury buyer is willing to partner with a single firm for services such as private banking, investment management, trust and estate planning, and life insurance needs, a lender is likely to develop creative portfolio lending opportunities.

At Prosperity Mortgage, our expert Private Mortgage Bankers can partner with Wells Fargo’s Private Bank to offer even more options through portfolio lending solutions. This program allows our Private Mortgage Bankers to originate loans with relationship-based pricing, which can be a significant benefit to luxury clients in terms of flexibility and value.

Jeffrey S. Detwiler is president and chief operating officer of The Long & Foster Companies, parent company to Long & Foster Real Estate, Inc., the largest independent real estate company in the U.S., and Prosperity Mortgage Company, a joint venture with Wells Fargo. From extensive, neighborhood-level market information to Long & Foster’s core services companies—providing mortgage, settlement, insurance and property management in a streamlined manner—Long & Foster offers the services necessary to make today’s real estate transactions manageable for owners and investors.

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