Mortgage brokers searching for the whole enchilada may have to settle for just a fraction.
Vacation Finance announced it expanded its fractional home loan program with improved interest rates and terms.
"The fractional business is booming," the retail and wholesale lender said in the announcement. "It makes good financial sense for the home buyer, they can own multiple homes at the price of just one cottage.
"There are fractional projects popping up in every major second home market in America, and we intend to lend to all the best projects."
The program is available to select brokers, Vacation Finance Chief Executive Bob Waun told MortgageDaily.com in an e-mailed statement.
Borrowers must have a minimum credit score of 700 and have a 45% debt-to-income ratio, according to program guidelines.
Vacation Finance, which operates online at www.Vacation-Finance.com, said Fannie Mae, Freddie Mac and the major wholesale mortgage banks do not purchase fractional mortgages and are not expected to in the near future.
"Most lenders will not lend to fractional home purchasers because of the complicated effect on real estate title," the Birmingham, Mich.-based company said in the announcement. "When a 1/4 share of a condo is sold to the consumer, they receive both a deeded real interest of 25% of the property, plus a limited time use right.
"We like the fractional paper because we understand it and the buyers who purchase this niche real estate, it is too small of an opportunity for large lenders, but a trend that is skyrocketing. The same buyers of fractional real estate, buy fractional aircraft and yachts, we like these borrowers."
The fractional home loans are available as a 3/1, 5/1, 7/1 or 10/1 adjustable-rate mortgage with respective rates of 7.75%, 7.89%, 8.07%, and 8.25% Brokers can also offer the loan as an interest-only 3-year or 5-year ARM, with rates of 7.98% and 8.08%, respectively, Vacation Finance said.