Tag Archive for: traditional lending

Investor mortgage report

The going is still tough out there for real estate investors looking for traditional financing.

 

 

What We Know:

This week doesn’t bring much (if any) relief to the mortgage markets.  The Feds have slowed down buying mortgage back securities and closings are still tough.

 

We are seeing the majority of our payoffs being delayed 2-3 weeks as mortgage companies push loans through these uncertain times.

 

Unfortunately, this means–once again–the real estate investor doesn’t rank high on their list of loans to close (or close fast).

 

The good news? There are still lending options for Real Estate Investors.  You just need to know where to find them.

 

Even though most traditional lending options are currently off the table, there is still one source that is interested in lending to real estate investors (at least in some markets):

Credit unions.

 

 

According to our market research, there are still a couple of credit unions maintaining business as usual. Better yet, they are still lending with good terms on rental properties.

 

Why do they seem less impacted than the rest of the lending world?  The answer is heavily based on their loan mix. Unlike banks, credit unions do not have a heavy investment in all these small businesses that have closed down. (Remember, the closure of small businesses impacts banks via deposits and bad loans. Bad loans create a need for banks to slow down on all lending.) Secondly, a good deal of their mortgages are kept inside the credit union, and don’t rely on secondary markets to keep lending.

 

So, if they can make a good loan on a piece of real estate, they will.

 

What You Can Do:

Of course, not every credit union lends on rental properties. You will need to call around in your market to find out which ones offer this service.  

 

 

Also consider that the ones who are doing these loans will be BUSY, and you’ll need to be patient.  It took us 2 days just to get a call-back…that is just reality in the strange times we’re living in.

 

Want to stay on top of what’s happening in the market, as well as what you can do to help your investor business thrive in a post-pandemic lending world? Get signed up for our weekly webinar series and join our mailing list for info, insights, and action items geared toward helping you take the guesswork out of your funding.

 

Sign up here >>>>

 

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Investor mortgage report

Why did all the banks just make it damn near impossible to get a loan on an investment property?

 

 

For lenders, times are more uncertain than ever.

 

With conventional/standard loans as the only lending option available for rental investors, lenders went and changed the rules…and not in the investor’s favor.

 

As of this week, the new underwriting criteria has hit 90% + of the market for investor loans on rental properties. Plus, most lenders now require a minimum of 6 months reserves (and, a lot of times, up to 12 months) for every rental property that has a loan on it. That’s right. If you have four rental properties, you now need at least 6 months of payment reserves on each property. That adds up quickly.

 

That may not even be the worst of it.

 

In addition, most lenders are not allowing borrowers to use the rental income from their properties to qualify. If they do, they might only allow a very low percentage of the rent (like 50% of gross rent). That means if you have rent coming into a property at $2K, they may only count 50%, or $1K, of that towards your expenses (if they allow you to use it at all). In this example, if the rental property has expenses at or above $1K (and most will) the underwriters will expect you to cover the shortage with other non-rental cash flow.

 

So, if you don’t have great credit (lenders have raised the threshold here, too) and other income to qualify for a new loan, you will be out of luck…for now.

 

We don’t know how long this will last. It might be weeks, but more likely months. Nobody will know until banks and lenders figure out how current stay at home orders will affect the markets.

 

So, why exactly is this happening?

 

 

Once the lenders get the data, they will adjust. Let’s cross our fingers that rents are being paid and, likewise, mortgages are kept up.  This flow of money will help bring lenders and loan choices back to our market.

 

What can you do?

 

  • Keep informed on what is happening in the lending markets. If you are selling properties, then stay updated for your potential buyers, too.
  • Keep paying your mortgages. This will help the overall market, but especially you when you are looking to borrow in the future for better rates (the rates are expected to be great after we return to some normal) or new opportunities.
  • Keep your credit score high and keep working with your renters to pay what they can when they can.

 

Remember the loans and rates will come back. When they do, be prepared to take advantage.

 

If you have a credit score at or above 760, and have ability to income qualify, then your rate estimates this week for conventional loans look like the following:

 

  • Paying closing costs rates for rental properties (1-4 units) in the high 3’s for a rate and term. Typical break-even point is between 2 and 2.5 years.
  • Paying little to no closing costs rates are high 4’s (best for strategies for keeping a property under 2.5 years).

 

If you want to know where you stand and what you can do, schedule a time to discuss your lending needs with us today by emailing mike@thecashflowcompany.com.

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Don’t be controlled by banks. It’s time for you to take control!

That noise you just heard? That was the sound of conventional lenders across the country slamming the door and walking away from the lending on investment properties. For those of us who make our living through fix and flips, fix and holds, and other real estate investments, it’s not exactly a GREAT sound.

But if you listen carefully, you might also be able to hear the rumblings of coming change. Just because the banks are currently the bearers of bad news, doesn’t mean it’s time to give up. Take back control of your financial future by disrupting the chain and breaking the bank’s monopoly. And the good news?  It’s actually easier than it sounds.

How, you ask? Simple. Start funding your own deals with 100% OPM – Other People’s Money. Cash from your mom, your neighbors, your golfing buddy—really, this source of capital can come from anyone who has money and is looking to invest it. 

This easier-than-it-seems solution really can help you thrive now during a period of economic uncertainty, as well as far into the future. No matter the economy, you’ll never have to worry about being controlled by what the banks have to say. If they shut the door to funding on you, you’ll have a way to keep investing and continue turning a profit for you AND your lending partners. 

 

Want to see just how easy it can be to transition your current real estate investment business model? Join us for our next informative webinar session!

Just remember: Keep it legal, keep it safe, keep it honest. 

 

Establishing trust is KEY in this funding model. When you’re dealing with other people’s cash to fuel your investments, it’s critical to stay transparent and protect everyone’s best interests.

 

Want to know more? Sign up here for our next session. >>>>

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As introduced earlier, there are 5 paths to take with financing your rental property:

4 Key Factors to Consider Before Financing Your Rental Property

So, what’s the best path for you? It’ll depend on the following 4 key factors:

  1. Credit
  2. Savings and other liquid financial assets
  3. Income
  4. Experience as a landlord

Based on your answers, what is the best loan for you now? How about in two years?

Need to know more about each loan type before you can answer these questions? Check out our Loan Cheat Sheet here!

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