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How Piggyback Loans Work | Mortgages and Advice


If you’re making a small down payment on your home, a piggyback loan might help you avoid some extra costs on your mortgage. However, these types of loans aren’t without their own costs and drawbacks. Here’s what you need to know.

What Is a Piggyback Loan?

Homebuyers use piggyback loans to avoid paying private mortgage insurance, which typically kicks in if your down payment is below 20% of the home’s selling price. PMI acts as an insurance policy to protect the lender if you fall behind on payments or default altogether.

A piggyback mortgage arrangement typically offers a primary mortgage for 80% of the home’s value, plus a home equity product to make up the difference between your down payment and the remaining 20%.

The piggyback loan typically comes with a higher interest rate than the first mortgage, and the rate can be variable, which means it can increase over time.

Piggyback loans became popular during the housing boom in the early to mid-2000s. In 2006, for instance, roughly 30% of homebuyers in New York City used one, according to a 2007 report from the NYU Furman Center.

The loan combination made it possible for aspiring homeowners to buy the homes they wanted and avoid PMI without putting down 20% or more in cash. But it also left their homes more vulnerable to default.

When the national housing bubble burst in the late 2000s, homeowners with less equity in their homes were more likely to default than others who had significant equity.

Piggyback mortgages still exist but are rare. “There was a decrease in popularity but also a substantial tightening up of the guidelines by the lenders that offer those piggyback second mortgages,” says Jeff Brown, a branch leader and mortgage originator for Axia Home Loans.

And they’re not seeing much of a comeback, even with the recent spike in home prices. According to Ralph DiBugnara, CEO of Home Qualified, a digital real estate resource, “the need has been reduced with the expansion of mortgage products that require less than a 20% down payment and do not require PMI.”

Types of Piggyback Loans

There are a few different ways you can structure a piggyback mortgage. Here’s how the different options break down based on your primary mortgage loan, piggyback loan and down payment.

  • 80/10/10 loan. This option is worth considering on a conventional loan and involves a primary mortgage covering 80% of the sales price, a piggyback loan financing 10% and a down payment covering the remaining 10%.
  • 80/15/5 loan. This option works similarly to the 80-10-10 loan, but instead of putting down 10% and borrowing the remaining 10% with a piggyback loan, you’re only putting down 5% and financing the remaining 15% with the second home loan .
  • 75/15/10 loan. This option, which involves a 15% piggyback loan and a 10% down payment, may be used when buying a condo. This is primarily because mortgage rates for condos tend to be higher if the loan-to-value ratio is higher than 75%.
  • 80/20 loan. This arrangement, which was popular during the years leading up to the 2007 housing crisis, didn’t require a down payment at all. You’d simply take out a primary mortgage to finance 80% of the sales price and 20% with a secondary loan to cover the rest. This piggyback arrangement isn’t common anymore, though.

Pros and Cons of Piggyback Loans

If you’re considering a piggyback mortgage, it’s important to understand both the benefits and the drawbacks.

Pros of Piggyback Loans

It could save you money. PMI can cost between 0.3% and 1.5% of your loan amount annually. So if your mortgage is for $250,000, you could be on the hook for $750 to $3,750 in PMI premiums each year. That translates to a monthly payment of $62.50 to $312.50 on top of your principal and interest payment to your lender, plus property taxes.

Depending on how much the second mortgage costs in monthly payments, you could end up paying less than you would with PMI. But it easily could go either way, says DiBugnara. “Some second mortgages used for piggyback loans will carry a much higher interest rate,” he adds. “In that case, it’s very likely that the payment will be higher than a PMI payment.” Make sure you do the math to find out which option is better in your situation.

You can deduct interest from both loans. The IRS allows you to deduct interest paid on up to $750,000 in qualified mortgage debt ($375,000 if you’re married but filing your tax returns separately). That includes home equity loans and HELOCs used to buy, build or substantially improve the home used as collateral.

Adding these savings into your calculation of whether a piggyback loan can save you money can make things more complicated. Also, it can be tough to know exactly how much you could save – or even if it makes sense to itemize your deductions and claim the mortgage interest deduction at all – unless you speak with a tax professional.

You can keep a HELOC for other purposes. A home equity loan is an installment loan, which means you get the full loan amount as a lump sum and pay it back in equal installments. With a HELOC, however, you’ll get a revolving form of credit during the draw period, which you can pay back and borrow again over time to pay for home improvements and other expenses.

Cons of Piggyback Loans

Closing costs could reduce value. In addition to paying closing costs on your first mortgage, you may need to pay closing costs on your home equity loan or HELOC. However, some lenders offer home equity products with low or no closing costs. You’ll want to find out what the lender charges so you can include it in your calculations.

Even if closing costs are low, the math may still not work out in your favor, and paying PMI could end up being cheaper than taking on a second home loan.

It could make refinancing tough. If you get your piggyback loan from a different lender from the one that provides your first mortgage, which is typical, refinancing your home to get cash out or score a lower interest rate could be more difficult later.

This is because both lenders would need to agree to the refinance unless you’re taking out a big enough refinance loan to pay off the second mortgage. Convincing both lenders can be tough, especially if the value of your home has declined since you bought it.

The cost could go up over time. If the second loan you’re taking out is a HELOC with a variable interest rate, don’t base your calculations solely on the current cost of each option.

A variable interest rate can fluctuate with the market index interest rate. There’s no way to know exactly how much more a variable interest rate can cost you, because it’s impossible to predict the movements of market interest rates. If you’re on a tight budget and can’t handle having your mortgage payment increase over time, a variable-rate piggyback loan may not be a good choice.

How Do You Qualify for Piggyback Loans?

Qualifying for a piggyback loan can be difficult because second mortgage lenders may have different eligibility requirements. While the specifics can vary from lender to lender, here’s what you’ll typically need to get approved for both loans:

  • Creditscore. You’ll typically need a FICO score of 620 or higher for the primary mortgage, but the minimum for the secondary mortgage can be 680 or higher.
  • Debt-to-income ratio. Mortgage lenders like to see a debt-to-income ratio of 43% or lower, and that includes both the primary and secondary home loans.

Note that a smaller down payment will also typically result in higher interest rates.

Piggyback Loan Alternatives

Look for loans with no PMI. Some lenders offer conventional loans with no PMI even if you don’t have a 20% down payment. Depending on the lender, this can be restricted to a first-time homebuyer or low-income program, or you may need to agree to a slightly higher interest rate.

As with a piggyback loan, run the numbers to make sure you’re not paying more in the long term with a higher rate than you would with PMI.

Pay down your balance quickly. Conventional mortgage lenders will usually add PMI to your loan if your loan-to-value ratio is higher than 80%, but eventually your loan balance should fall under that threshold. Lenders are required by law to automatically remove the PMI once your LTV reaches 78% based on the original loan and home value.

If you’re expecting a significant windfall or have the cash flow required to make extra payments, it could help reduce your loan balance more quickly and get you to the point where you no longer need the insurance.

As you’re working on paying down your balance, if you think your home’s value has increased and you’re at or below 80%, you can get an appraisal done on the house. If you’re right, you can request that the lender remove the PMI manually.

Wait until you’ve saved enough. While there are ways to buy a home now and avoid PMI, you might be better off waiting until you have enough cash on hand for a 20% down payment.

Saving the 20% you need to avoid PMI can take years. But if you think you can save enough cash quickly, it may be worth it to wait.

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What Are The VA Loan Limits? –Forbes Advisor

What Are The VA Loan Limits?


Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.

Veterans Affairs (VA) home loans offer an easy way for service members, Veterans and their spouses to buy a home without saving up for a down payment or paying for private mortgage insurance (PMI).

The maximum VA loan limits you can qualify for are based on entitlement, lender, credit and the county you’re buying your home in. Here’s what you should know about the VA loan limits for 2022.

VA Loan Limits for 2022

As of January 1, 2020, there are no loan limits for VA loans of more than 144,000 if you have full entitlement. The Blue Water Navy Vietnam Veterans Act of 2019 removed VA loan limits for all veterans and service members. This is the legislation that eliminated VA limits beyond the conforming loan limits set by the Federal Housing Finance Agency (FHFA).

Even though these loans no longer have VA specific limits, the FHFA still sets the maximum borrowing amount. That limit may be divided among multiple homes, however, so you may not have entitlement if you had a previous VA loan that you didn’t pay off on a home you no longer have.

The limit doesn’t cap the amount you can borrow overall—just what you can borrow for a mortgage with no down payment.

VA County Loan Limits 2022

Though the VA itself no longer governs loan limits, there are absolute maximum VA county loan limits that are based on numbers from the FHFA.

Most of the country has a maximum limit of $647,200. However, some counties have higher limits, and they aren’t necessarily located where you’d think they would be. For instance, Tennessee has a few counties with limits up to $694,600.

New York, California, Alaska, Utah, Wyoming, Virginia and Hawaii have counties with a $970,800 limit, for example. Washington state has counties with limits nearing $900,000. Colorado, Idaho, Massachusetts, New Hampshire and Maryland are other states with some high county loan limits.

You can check out the FHFA’s conforming loan limits map to find the limit in your area.

VA Loan Limits Set by Lenders

Even if you have full entitlement, lenders might have their own loan limits based on your income, debt-to-income (DTI) ratio or credit score. So, each lender’s VA loan requirements may be different.

If one lender doesn’t offer you the amount you need, compare the offer with other lenders. This is always a good idea so you can find the loan that best fits your needs.

What Is VA Entitlement?

VA entitlement is the amount the VA is willing to pay your lender if you can’t pay your mortgage.

If you’re considering a VA loan—and qualify for one—the first step is to get your entitlement certificate to present to lenders. But there are different types of entitlement that can affect your loan limits.

VA Full Entitlement

Since getting a VA loan is considered a VA benefit, a fully entitled person must fall into at least one of these three categories:

  1. You’re using your home loan benefit for the first time.
  2. You paid off a VA loan in full when you sold your home.
  3. You short-sold your home, but still paid the VA back for the full amount of your loan.

Here is what the VA guarantees with full entitlement:

  • For any loan up to $144,000: The VA pays up to $36,000
  • For any loan over $144,000: The VA pays up to 25% of the loan amount

Tip: Don’t worry about additional terms like full entitlement or bonus entitlement. Most of that is technical language the VA uses when working out the details with lenders. But always check with your lender first to ensure you understand all the details before taking out a loan.

VA Partial Entitlement

If you own a home, you may have partial eligibility for up to the remaining amount of your total VA home loan entitlement limit.

Let’s say you want to buy a home appraised at $400,000 and you have a $200,000 house. You have enough remaining eligibility based on the lowest county limits in the country to own both properties.

keep in mind: Each lender has different requirements to qualify. So make sure you review the details to ensure you’re eligible for the loan you want.

How to Get a VA Entitlement Certificate

If you’re considering a VA loan, the first step is to get your VA home loan Certificate of Eligibility (COE). To get your COE, you’ll need military paperwork to apply.

  • veterans: Need their discharge and separation papers (DD214)
  • Active duty service members: Need a statement of service signed by their commander, adjutant or personnel officer with the information the VA requests

You can find a full list of requirements based on your service at the US. Department of Veterans Affairs website.

Qualifying For a VA Home Loan

VA home loans offer military service members and veterans the opportunity to buy a home with a lower credit score and even sometimes a better rate—while avoiding the upfront costs of down payments and private mortgage insurance.

Applying for a VA loan is different from applying for a regular mortgage. But once you secure your COE and compare the best VA lenders, you’ll have a better idea of ​​what you can afford—and which loan is the right fit.

Faster, easier mortgage lending

Check your rates today with Better Mortgage.



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Kentucky Agricultural Finance Corporation approves $1,732,750 in loans

Kentucky Agricultural Finance Corporation approves $1,732,750 in loans


FRANKFURT, Ky. — The Kentucky Agricultural Finance Corporation (KAFC) approved $1,732,750 for nine agricultural loans for projects across the commonwealth at its monthly board meeting.

Agricultural Processing Loan Program (APLP)

An Agricultural Processing loan totaling $500,000 was approved for an operation in Greenup County. APLP is designed to provide loan opportunities to companies and individuals in Kentucky interested in adding value to Kentucky-grown agricultural commodities through further processing. Agricultural processors may qualify for financing for the acquisition of equipment, construction of new facilities, renovation/expansion of existing facilities and permanent working capital up to 50 percent of the project cost.

Beginning Farmer Loan Program (BFLP)

Seven Beginning Farmer loans totaling $1,132,750 were approved. Loan recipients were in Hardin ($212,500), Hart ($42,500), Hickman ($250,000), Marion ($128,250), Pendleton ($122,500), Todd ($250,000), and Whitley ($127,000) counties. The BFLP is designed to assist individuals with some farming experience who desire to develop, expand, or buy into a farming operation. Beginning farmers may qualify for financing to purchase livestock, equipment, or agriculture facilities; to secure permanent working capital; for the purchase of farm real estate; or to invest in a partnership or LLC.

Diversification through Entrepreneurship in Agribusiness Program (DEAL)

A Diversification through Entrepreneurship in Agribusiness loan totaling $100,000 was approved for a recipient in Nelson County. DEAL is designed to assist agri-entrepreneurs with the purchase, establishment or expansion of a business that sells agricultural products or services to farmers or consumers.



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Bank Loan ETFs Offer Inflation-Fighting Potential


The Federal Reserve is two increases into its interest rate tightening cycle, and more — perhaps much, much more — could be on the way with inflation remaining high.

As such, fixed income investors are feeling considerable pain. The widely followed Bloomberg US Aggregate Bond Index is down 10% year-to-date, and one of the most talked-about anecdotes is that nearly all fixed income exchange traded funds are in the red this year.

Bank loan funds are included in that group, but the Invesco Senior Loan ETF (BKLN) deserves some credit, as it’s beating the “Agg” by 450 basis points year-to-date. While BKLN is in the red, many investors are embracing bank loans for above-average income levels and inflation-fighting potency.

“Many investors are turning to bank loans, also known as floating rate loans, which are debt instruments whose coupon is linked to a short-term interest rate like LIBOR or SOFR. Given the floating rate nature of the asset, adding bank loans to your portfolio can lower duration and increase potential income as the Fed looks to continue raising short-term interest rates to combat the recent surge in inflation,” according to BlackRock research.

As the asset manager notes and as is confirmed by BKLN’s track record of over 11 years, bank loans are among the fixed income instruments that are durable when interest rates climb. Additionally, this is one of the bond segments with positive correlations to inflation.

With a bank loan, an investor’s outcomes are determined by credit spreads, floating rates linked to LIBOR or SOFR, capital appreciation, or a combination of all three.

“The ‘floating’ coupon feature reduces interest rate sensitivity for bank loans which has contributed to the asset classes historical outperformance relative to ‘fixed’ income assets in rising rate environments,” adds BlackRock. “The ‘floating’ component of a bank loan resets periodically and will dictate when investors realize the benefit of rising rates. Coupon rates are initially set when a bank loan is issued, comprised of a benchmark interest rate (historically LIBOR and, going forward, SOFR) plus a credit spread.”

BKLN, which tracks the S&P/LSTA US Leveraged Loan 100 Index, holds 138 bank loans that are generally linked to three-month LIBOR.

These fixed income assets are generally used by junk issuers, as highlighted by 95% of BKLN’s holdings being rated BBB, BB, or B. However, investors are compensated for that risk with a 30-day SEC yield of 3.41%, and corporate default rates are currently low.

For more news, information, and strategy, visit the ETF Education Channel.

Read more on ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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The 10 Best Places to Get an Online Personal Loan

Anxiety and Depression


Economic times have been tough for most of us. It’s often difficult to make the paycheck stretch from one pay period to another. When something unexpected happens to blow your budget for the month, it can leave you wondering what to do to fill the gap. A solution is to take out an online personal loan to get you through the rough spots. It’s essential to avoid predatory loan providers so you don’t end up paying hundreds in percentage points on small loans. If you need to take out an online personal loan, it’s vital to compare the interest rates and go with the financial company that offers the most competitive rates. Most people with decent credit scores can save by comparing. Even if you have bad credit, but you’re employed, there is a loan out there for you. Here are the 10 best places to get an online personal loan.

10.Upstart

  • Rating: 4.5
  • Minimum credit score: None
  • APR: 5.39-35.99%

Nerd Wallet recommends Upstart for people with bad or no credit. Upstart offers online personal loans from $1,000 to $50,000.It’s one of the better options for applicants with short credit history. It’s good for borrowers trying to build their credit. Upon approval, funds may be available within one business day. You may also use this company to consolidate debt or send a direct payment to creditors. You can also choose the payment date for your loans or change the payment date. The company charges an origination fee. You must have a minimum gross income of $12,000 with full or part-time employment for 6 months or other regular income. You must be a resident of the US with a valid street address, a bank account, and a valid email address. Loan terms range from 3 to 5 years. At 36 months a loan at 5.39% will cost you $2,285.74 for $1,000.

9. Lending Club

  • Rating: 4.5
  • Minimum credit score: 600 or higher (good to fair)
  • APR: 6.34-35.89%

Lending Club offers online personal loans for applicants with a credit score of 600 or higher. Loans range from $1,000 to $40,000. The company conducts a soft credit check when you pre-qualify and offers joint loan options if you have a co-signer. You can change the payment date to the most convenient due date. The company charges an origination fee, and you have two repayment term options. Lending Club is a reputable finance company with high ratings in the online personal loan industry.

8. Lightstream

  • Rating: 5.0
  • Minimum credit score: 660 or higher (good or excellent credit)
  • APR: 4.99-19.99%

Lightstream offers loans from $5,000 to $100,000 for people with good or excellent credit scores. The benefits of Lightstream loans are the low-interest rates with a discount of 0.5% for autopayments and no fees. On the downside, you must have a credit history of several years with no prequalification option on the website. It doesn’t offer direct payment to creditors for consolidation loans. It’s one of the best and lowest-interest loans for applicants with good to excellent credit.

7. Lending Point

  • Rating: 4.0
  • Minimum credit score: 600 or higher
  • APR: 7.99-35.99%

Lending Point is an online personal loan choice that is recommended for applicants with bad credit who need funds fast. The interest rate is based on your credit score. The company offers loans from $2,000 to $36,500. They conduct a soft credit check after pre-qualification and offer the option of changing your payment due date. Funds can appear in your account one day after you’re approved for the loan. The APR is high, so it’s not the best option for applicants with good to excellent credit ratings. It’s best for borrowers with either bad credit or limited credit history. This company does not participate in co-signed or joint loans.

6.Discover

  • Rating: 4.3
  • Minimum credit score: Not indicated on the website
  • APR: 5.99-24.99%

Investopedia recommends Discover as the best online personal loan provider for debt consolidation. The APR is reasonable compared to other online personal loans and you can receive your funds as soon as one day from approval. The company issues loans from $2,500 to $35,000. They advertise that applications do not impact your credit rating so we assume that they do not make a pull on your credit score. They do not charge origination or administrative fees and they send payments to creditors on your behalf or deposit funds into your bank account. Loan terms range from 36 to 84 months.

5.Upgrade

  • Rating: 4.3
  • Minimum credit score: 550
  • APR: 5.94-35.97%

Upgrade is a lender that provides online personal loans for people with bad credit, who have a minimum credit score of 55 or better. The loan amounts range from $1,000 to $50,000. The APR is based on your credit score. The company charges an origination fee between 2.9 to 8% of the loan amount but offers discounts for autopay. They also offer direct payment to creditors. Most loan funds are released within one day of loan approval.

4. Rocket Loans

  • Rating: 4.2
  • Minimum credit score: 580
  • APR: 5.97-29.99%

Rocket Loans offers credit to applicants with a secure monthly income source and a minimum credit score of 580. Loans from $2,000 to $45,000 are available with most approved loan funds released the same day. Rocket Loans are available for applicants in most states. The company charges an origination fee between 1 to 6 percent of the loan and it does not send funds directly to creditors. They don’t offer a co-signer or joint program, but they’re one of the fastest loan companies for those with bad to excellent credit.

3. Loans Under 36%

  • Rating: 4.8
  • Minimum credit score: None
  • APR: 5.99-35.99%

Loans Under 36% is a lending company that provides online personal loans for people with bad credit, limited credit histories, or those with excellent credit with competitive rates. The loans offered are based on personal income and can go up to $35,000. Borrowers may choose from loan terms between 3 to 72-month repayment plans, based on the loan amount.

2.Lending Tree

  • Rating: 4.6
  • Minimum credit score: 350
  • APR: 2.49-35.55%

Top 10 Personal Loans recommends Lending Tree as one of the top loan providers compared to the sea of ​​lenders in the finance market. It’s a lender that assists borrowers with bad to excellent credit, offering the most competitive rates based on credit history. Borrowers can choose from loan amounts up to $50,000 based on personal income with loan terms from 12 to 144 months. The company offers online personal loans for those who qualify.

1. Credible

  • Rating: 4.9
  • Minimum credit score: 600
  • APR: 3.49-35.99%

Credible offers loans up to $100,000 for applicants with a stable income source and a minimum credit score of 600 or higher. Submit one application to receive multiple offers from lenders. Loan terms range from 12-84 months. Interest rates are competitive and better for those with excellent credit scores. Loans taken through Credible do not impact your credit score. The application process is simple and upon approval, funds are released within 24 hours.



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“11 Years In The Academy & Loans, Well-Deserved Joy For Inter’s Federico Dimarco”

“11 Years In The Academy & Loans, Well-Deserved Joy For Inter's Federico Dimarco”



Italian journalist Fabrizio Biasin has said that Federico Dimarco deserves the joy of lifting the Coppa Italia trophy with Inter, according to a report in the Italian media.

As was written by Fabrizio Biasin on TwitterFederico Dimarco is a player that has been on the books at Inter for a very long time and certainly put the effort in to eventually lift a trophy with the Nerazzurri.

He has been in the academy since 2004, eventually graduating in 2015. He has been on loan spells at Ascoli, Empoli, Parma and Hellas Verona during his development and he even left Inter for Sion in Switzerland at one stage before coming back.

He has worked hard to get as much game time as possible under Simone Inzaghi this season and that is why Fabrizio Biasin felt it necessary to point out how much the defender deserves Coppa Italia success.

“Two words for this young man who, after 11 years in the youth ranks of Inter and loans here and there, has returned to his favorite team and is proving to be as valuable as his left foot. Well-deserved joy for Federico Dimarco.”






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Disaster relief loans available in Gilmer for severe storm victims

Disaster relief loans available in Gilmer for severe storm victims


TYLER, TX (KLTV) –

It was a thunderous two month period in East Texas and storms and tornados roared through, damaging homes, businesses and property.

Upshur county residents are still reeling from tornado damage in March.

On the third floor of the Upshur county courthouse in Gilmer, representatives of the US Small Business Administration are available to help businesses and homeowners with ‘SBA’ loans.

“A lot of people don’t come in contact with our agency unless a disaster has happened. So we’ve come in and we’re able to offer low interest disaster loans that are federally backed. This is for uninsured losses,” said public information officer Rick Tillery.

Victims of the severe storms and tornado, can visit the location and get in person help to complete the application for a federally backed disaster loan.

The most common misconception about disaster loans through the SBA, is that they’re for business only. Absolutely false.

Homeowners, renters, businesses, and private non-profits can be covered for a variety of uninsured losses.

“These are loans and they must be paid back. You can get up to 200-thousand dollars for the home structure the homeowners and 40-thousand dollars for personal property inside the home and a primary vehicle. Also applies to renters. Talk to your insurance company, see what’s covered, and then we’ll cover what’s not covered by your insurance company,” Tillery says.

And for SBA workers, perhaps make recovery a little easier.

“It can be a little challenging to come into a community and to work among these people who have gone through some serious tough times, but it’s fulfilling to be able to help them to recover,” says Tillery.

The SBA offices will be open Monday through Friday at the Upshur county courthouse, and will be on hand until May 26th for loan applications.

Copyright 2022 KLTV. All rights reserved.

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Better.com CEO Vishal Garg says he is ‘personally liable’ for $750M SoftBank loan – TechCrunch

Better.com CEO Vishal Garg says he is 'personally liable' for $750M SoftBank loan – TechCrunch


Better.com CEO Vishal Garg has acknowledged to employees that he “personally guaranteed” the $750 million cash infusion provided to the online mortgage lender last November in an email seen by TechCrunch.

Let’s start at the beginning. Last May, Better.com announced that it was going public via a SPAC that would value the company at nearly $7 billion. Then on November 30, the company announced that blank-check company Aurora Acquisition Corp. and SoftBank decided to amend the terms of their financing agreement to provide Better with half of the $1.5 billion they committed immediately instead of waiting until the deal closes.

But what wasn’t revealed at that time, as Fortune reported last week, was that when SoftBank ponied up that $750 million in November, it was Garg – not the company as a whole – who assumed responsibility for compensating the Japanese investment conglomerate for any losses.

Specifically, an S-4 filing by Aurora states:

The Better Founder and CEO, in his personal capacity, has agreed to enter into a side letter with SoftBank, pursuant to which he may be liable for realized losses or receive payments in certain circumstances from SoftBank in connection with the Post-Closing Convertible Notes, which could divert the resources and attention of the Better Founder and CEO from our business and have a negative impact on his personal financial situation.

Notably, the amount of losses covered by the side letter is uncapped, and Garg alone “remains responsible for all such losses, which could require him to, among other things, sell a significant portion of his holdings in Better Home & Finance common stock, which could negatively impact the trading price of Better Home & Finance common stock.”

As mentioned above, in response to details of the arrangement being made public, Garg sent an email — viewed by TechCrunch — to all current Better employees, acknowledging personal responsibility for that $750 million cash infusion. In the email, he admitted that he “personally guaranteed” SoftBank $750 million of the $1.5 billion that SoftBank had agreed to invest back in November of last year because he “wanted the capital to build our dream,” knowing “the world was about to get ugly.” He wrote:

I might be foolish, but I believe in us. I believe in you. I believe in our mission. I believe in our vision. And I believe that we are the only people on this planet who will do everything needed to make homeownership better, faster, cheaper, and make it possible for everyone everywhere…. I am fully committed with everything I own and will ever own….Five years from now, when that SoftBank $750 million loan comes due around my 50th birthday….if it means I have nothing. Well, at least we will have given it a real shot…This is true. I did personally guarantee three quarters of a billion dollars and I’m personally liable for it.

Meanwhile, multiple sources also have shared that Better.com in recent weeks offered its workers in India the option to leave under a voluntary separation agreement. Apparently, more workers put their hands up — reported 90% of 2,100 — than the company expected and it had to put a cap on how many workers could leave.

Sources said it was mostly “closers and analysts” who were allowed to leave, and about 920 workers total had their resignations accepted. One individual shared an email from HR India turning down their request saying that the worker was “part of a mission-critical team” at Better. A separate email that went to the company’s operations team outlining a structural reorganization said the need to offer voluntary separation to the company’s India employees was due to recognition that “there are declines ahead and responding to these to ensure Better is positioned for profitability remains essential. ”

Better did not respond to requests for comment.



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Student Loan Borrowers Don’t Deserve ‘Forgiveness.’ They Deserve an Apology.

 Student Loan Borrowers Don't Deserve 'Forgiveness.'  They Deserve an Apology.


Still not convinced that the nation should ask debtors for absolution, and not the other way around? Consider the facts.

First, there’s the Free Application for Federal Student Aid, or FAFSA, which for decades has yoked millions of students and families each year to its cumbersome form, confusing questions and confounding — and infuriating — “expected family contribution.” New legislation brings the number of questions down to a maximum of 36 from 108, but it, too, is so complex that it’s taking years to fully carry out the changes. And that does nothing to address the chasm that exists between what the federal system (and a second one, the CSS Profile, that many private colleges use) “expects” and what feels realistic to many families.

So what about Pell Grants?

They were named for Senator Claiborne Pell in 1980, though earlier versions existed for years because it had long been clear that the lowest-income teenagers couldn’t afford many colleges. But the help those grants offer has dwindled because legislators did not set the annual amount per person to track any index of college costs.

Phillip Levine, a Wellesley College economics professor and the author of a new book called “A Problem of Fit: How the Complexity of Pricing Hurts Students — and Universities,” has calculated just how far short this can leave low-income students.

Take teenagers from households with about $37,000 in income, which is about the 25th percentile of income and assets. By his calculations, the public schools he examined will ask the students who live on campus to pay around $14,000 each year, after accounting for Pell Grants and other scholarships. Even if these students max out their federal loans — $5,500 for most of those freshmen — and take a job via the federal work-study program, there will still be thousands of dollars each year left to cover. No one is minding that gap.

As we ask these teenagers to borrow tens of thousands of dollars that we’d never lend them for anything else, the government provides a menu of loan options. With some of this debt, interest starts ticking right away, years before you can even have a legal beer.

There wouldn’t be so much of a debt problem if, as a nation, we made a priority of subsidizing public higher education. But we don’t. Among the 26 nations that the Organization for Economic Cooperation and Development surveys, only Britain has higher average tuition for public universities than the United States.



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Self Build Construction Loans & Owner Builder Loans

Self Build Construction Loans & Owner Builder Loans


If you’re a real estate investor or a new homebuyer looking to create a dream home, a self build construction loan may be the right option. With this type of construction loan, you can build a new home and save money by acting as your own general contractor. If you already have homebuilding experience, you may be able to qualify for a self build construction loan.

In this article, we explain what a self build construction loan is, how homebuyers and real estate professionals can qualify, and what it costs.

What Is a Self Build Construction Loan?

A self build construction loan is a specialty loan that borrowers use when they plan to build a residential home and act as the general contractor during the construction process. It’s also called a DIY home build loan or an owner builder construction loan.

To qualify for any kind of construction loan, you usually need a qualified builder — meaning a licensed contractor with demonstrable experience building homes — to sign on to lead the project. With a self build construction loan, you’re acting as your own general contractor.

You’ll usually have to provide proof that you know how to build houses for the lender to approve your loan. You may need to have:

  • licensed
  • construction insurance
  • A detailed plan for the construction process
  • Experience with building homes

If you have had experience building homes and managing subcontractors in the past and you have the necessary documents, you may be able to obtain a self build construction loan. It could be a good fit when other small business loans can’t fulfill your real estate development needs.

How Do Self Build Construction Loans Work?

A construction loan can be more difficult to qualify for than other housing loans because of several factors. First, mortgage lenders are being asked to hand out money for something that hasn’t been built yet — there’s inherent risk in a construction loan since there’s no collateral in your house to fall back on. The current housing market, with its rising cost of goods and frequent shipping delays also aren’t helping. These factors make self build construction loans more risky to lenders than a traditional mortgage loan.

Once you’re approved for a self build construction loan, you don’t get the money in a lump sum like when you buy a house that’s already built. Instead, the money is distributed as building progresses. You can’t use the funds toward home design or furniture — but expenses like home appliances count as construction costs. Because you’ll supply a timetable for the planned construction period before getting the loan, you’ll want to ask your lender what happens if you run into delays or go over budget.

When you finish building, the construction loan is due — but you don’t have to pay it off right away. Instead, you can convert into a traditional mortgage through a refinance if you’re buying or put the house up on the market if you’re selling. Then the homebuyer will begin making regular monthly payments.

A construction loan can cover the cost of land and permits. But because the land purchase is usually the most expensive part of the home build process, you could consider buying the land first using a land loan or a blanket loan if you’re a developer. The easiest option is to look for build-ready lots that are already permitted and have all the hookups you need. But if you have time, you may be able to add those yourself.

Common Terms, Rates, and Fees of Owner Builder Loans

Just because it’s harder to qualify for a self build construction loan doesn’t mean it’s impossible. Lenders usually offset their risk by making it more expensive for borrowers to take out these types of construction loans. You’ll often have higher mortgage rates and down payment requirements. On the plus side, these are short-term loans, so payment is usually due within a year, or once the construction phase is over. So you would only pay the higher interest while building the new house.

With a self build construction loan, the down payment may fall between 20% to 25%. And as mentioned, your loan rates will probably be higher with a home construction loan, but the exact rate you can get varies based on your financial details.

Like with a standard mortgage, you’ll also pay closing fees for things like the appraisal, title searches, and administrative expenses. These cost about the same as a regular mortgage, around 2% to 6% of the loan amount. Developers can avoid paying multiple closing costs by using a blanket loan. Homebuyers may be able to avoid paying closing costs twice by using a construction-to-permanent mortgage that has a one-time close. A construction-to-permanent loan automatically converts to a mortgage, but your interest rate will probably be higher. It’s best to compare the total cost of each type of loan before making your decision.

What it Takes to Qualify for a Self Build Construction Loan

It takes a lot of work to prove to a lender that a self build construction loan isn’t too risky of a project to take on and that you can manage to finish it. First, you’ll likely need to have a good to excellent credit score to qualify for this type of construction loan. The lender will also look at your debt-to-income ratio, cash reserves, and your down payment compared to the project costs to ensure you can repay what you owe.

To make yourself look as prepared as possible, you can make a “blue book” that details all the factors and features of your construction project. Work with a builder or learn how to do it yourself.

pro-tip: It may be faster for pre-qualified borrowers to get an owner builder loan. When you get pre-approved, the lender has already looked into your financials and decided whether or not you are a good candidate for a loan. This step can speed up the final process significantly.

How to Apply for a Self Build Construction Loan

Before applying, you can use an online calculator to figure out how much you need to borrow. It’s best to assume your project will go over budget to avoid running into any issues with funding. Because you only pay interest during the build, current homeowners may ‌have the ability afford to stay in their current homes until their new house is finished.

Once you’re ready to apply for a self build construction loan, you’ll need to gather the documents that each specific lender requires. You’ll be required to present more documents if you’re acting as your own general contractor, such as:

  • Your personal finance information, like your bank records and your social security number
  • Your construction license
  • Your plan for construction, or “blue book”
  • Proof of insurance and building credentials
  • Prepaid homeowners insurance

If you have already pre-qualified, you’ll have a better idea of ​​how much you’ll be able to borrow.

FAQ’s

Do You Have to Have a Down Payment for a Construction Loan?

To qualify for a self build construction loan, you’ll usually need a down payment of between 20% to 25%. However, the federal government offers other types of construction loans to qualifying applicants through the USDA and the Department of Veterans Affairs that may not require any money down. If you can’t afford that high of a down payment to build your own home, there’s also the option to get a more affordable loan through the US government.

Do You Pay on a Construction Loan While Building?

Typically, lenders only require that you pay interest on the loan while you’re building. Your interest rate may be higher than with mortgages, but at least you don’t have to make full payments during the construction process. After building is complete (and the construction loan is probably turned into a mortgage), you’ll start making regular mortgage payments.

Is it Harder to Get a Construction Loan Than a Mortgage?

Yes. Because the home isn’t built yet, it’s riskier for a lender to offer you money for it. A standard mortgage funds a home that already exists that can act as collateral in case you can’t make payments on the loan. So a construction loan can be more difficult to obtain.

Other Options for Real Estate Investors

Investing in real estate can be costly, so if your business needs additional funding while you’re in the homebuilding process, take a look at Nav’s list of best credit cards for real estate agents and investors. Credit cards can help you ‌pay for smaller business purchases and help with cash flow when you need it — and some even build business credit just for using them.

This article was originally written on May 13, 2022.

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