Setabay Private Money Lender

Tuesday, August 7, 2018

What You Should Know About Owner Occupied Hard Money Loans

Hard money loans are also known as private money loans. Most investors prefer the favorable terms and ultra-low rates of conventional financing, but there are certain situations when owner occupied hard money loans can help you achieve your dreams.

If you cannot qualify for a conventional loan and you have a down payment of 30-40%, you may have a short-term solution, a hard money loan to assist you in acquiring a new home. Keep in mind that owner occupied hard money loans are usually easier to obtain than conventional loans. Most loans were equity based until 2008. At the time, if your loan to value (LTV) was 60% or less, a commitment would be issued without the lender considering if the borrower could repay the loan.

In today’s environment, the lender must confirm the ability of the borrower to repay the loan. This is tied to Dodd Frank law and a host of other regulations. On the other hand, owner occupied hard money loans can usually be obtained with a 30% down payment. The lenders may cut back the LTV to 50-60% for less desirable or rural areas. Keep in mind that a definitive exit strategy is needed by borrowers if they use hard money lenders.

If you have had a foreclosure or a short sale in the last 2-3 years, a hard money loan may be your answer to needed capital. Conventional loans require that you allow 3 years to pass before applying for a new conventional loan. If you are considering using a hard money lender you need to have an exit strategy to exit from the hard money loan. One exit strategy is paying off the hard money loan once your first home sells.

No Need for Sourced or Seasoned Funds for the Down Payment

There are very strict laws when a borrower is applying for a conventional loan. The lender in a conventional loan needs to know where the funds are coming from and how long the funds have been in the accounts. A hard money lender is more concerned with the equity position in the property and the borrower’s ability to repay rather than where the down payment funds come from. With a hard money lender, you can use funds from a business account or a family member.

Some hard money lenders require the following when obtaining owner occupied hard money loans:

· A signed Loan application

· Recent credit report

· A signed borrower authorization

· Credit authorization

· Consumer loan disclosures

· A purchase agreement for the property you wish to purchase

· Title report

· Evidence of escrow

· Proof of funds 30-40%

· Vesting

· W-2

· Pay Stub

· Down Payment proof of funds

If you have two properties, hard money lenders can make loans on both properties.

A “blanket loan” can be issued if the buyer has substantial equity in the selling property which is listed for sale with the new property. The properties will be “cross collateralized” which includes utilizing the vacating property and the new purchase. In real estate circles, this type of loan is considered a cross-collateralized owner-occupied bridge loan.

At Level 4 Funding, we make it a point to help you through the process of obtaining hard money loans without the need for mounds of paperwork. Three simple steps can set you up for success: a purchase contract, loan application and a written approval. We do not require tax returns, pay stubs or credit checks and there are no upfront or junk fees. Call us today for a no-obligation quote.

Happy senior business man making his notes at work Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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Monday, August 6, 2018

How To Benefit From Owner Occupied Hard Money Loans

Many consumers are unaware of owner occupied hard money loans. But these non-traditional loans can offer certain borrowers some great opportunities.

There are many reasons that a consumer seeks to borrow money from a non-traditional lender. In most cases, the hard money becomes an option when the borrower has bad credit, has a very hard to verify income or irregular income or the property is in disrepair or has other types of issues. All of these complications make it impossible to secure a loan from a traditional lender such as a bank or credit union but owner occupied hard money loans can meet the needs of these consumers.

Bad credit can be the result of one’s own financial mistakes or they can happen after the loss of employment or even a medical issue that resulted in huge bills, but the result is always the same. The consumer is not able to secure a traditional loan for many years Even after correcting his or her credit issues and creating a nice savings for a down payment, it can be impossible to get a mortgage from a bank. But owner occupied hard money loans are the solution for these potential homeowners.

These hard money loans can be used for the initial purchase of a home, to refinance an existing loan, debt consolidation or even to make repairs or remodel a home. The only prerequisites are that the borrower be living in the home which is the collateral for the loan and that the value of the home meets the lender’s criteria for loan to value ratio. This means that the amount of the loan being requested should be about 80% of the current market value of the property or less.

Common Terms of Owner Occupied Hard Money Loans

When purchasing a property, most hard money loans require a 30% down payment but in the case of an owner occupied property, the down payment can be as little as 20%. In the case of refinancing a loan, the hard money maximum is normally about 65% of the current market value of the property. But if the borrower owns a second property and holds the deed, then that free and clear property can be used as additional collateral on the hard money loan which can be up to 100% of the purchase price.

Interest Rates for Hard Money

Hard money loans are considered non-traditional because the approval of the loan is based on the value of the property and not based on the borrower’s creditworthiness or income. This means that the lender is willing to assume a greater risk when funding the loan and as a result of this increased risk of default, the lender is going to require a higher interest rate than a traditional bank. Currently, on hard money loans with a loan to value ratio of 70 to 80%, the interest rates range from 11.99% to upwards of 14.99%. In addition, loan origination fees can be anywhere from two to six points. While the cost of using hard money is certainly greater than the cost of a traditional loan, hard money is a great solution for someone trying to rebuild credit or establish a credit history.

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Grow Your Wealth With Hard Money Loans

Real estate investments are a great way to build your personal wealth. And hard money loans can offer you the fund that you need to begin building your portfolio and your wealth

Working 9 to 5 might be a good choice for many people but if you are interested in becoming your own boss and creating sizable personal wealth, then hard money loans could be the financial tool that you have been looking for. Real estate has always been considered one of the best investments that you can make. It holds value well and often times make huge leaps in value. But having the initial money to get started in real estate investing is not always possible. In these cases, the solution is using hard money to get started.

Hard money loans are non-traditional loans that are funded by private groups or individuals. The benefit of this is that the loan application and approval process can be must less stressful and a great deal faster than a traditional loan. In addition, the lenders are primarily interested in the value of the property and not the creditworthiness of the borrower. It is the current market value of the property being purchased that is used as the collateral to secure the loan.

One of the fastest growing sectors in real estate investing is flipping homes. Investors see a property with great potential, they buy for a reasonable price and then they complete the improvements to greatly increase the property value. But the key to the entire process is speed. The flipping business is very competitive so making the purchase quickly is the first important step for an investor. The fast funding of hard money makes it possible to make an offer on a property and have funds ready to pay the seller in just about a week. Using a traditional lender could drag out to a month or more.

Long-Term Relationships

The next critical step for a flipper is to complete the renovation quickly and sell the property for a profit. Again, this works well with the hard money funding as these loans are generally made for a term or one to three years. Flippers know that the fast funding and flexible terms or hard money work perfectly. In many cases, a flipper will find a hard money lender who is easy to work with and they will work together on many loans each year. This long-term relationship is great for the flipper as he or she knows funding is readily available and it also benefits the lender with a regular borrower who is eager to complete deals and pay off loans quickly.

A Profitable Business

Starting a real estate investment portfolio is a smart way to begin to build your wealth and plan for your future. But having the initial investment to get the business off the ground can be difficult. And getting a traditional loan might prove to be even more of a challenge. But reliable hard money loans can be the solution to securing the money that you need to get started and the loans that you will need in the future to continue to grow your business and your wealth.

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The Benefits of Discovering Hard Money Loans

Many consumers believe that hard money loans are only for questionable deals or for a last resort. But the truth is that these are legitimate loans with many great features.

Most people think that hard money loans are far from being a legitimate or realistic option when borrowing money. The image is only slightly higher than a loan shark, but that is due to ignorance and does not really apply to a hard money loan. In reality, a hard money loan is simply a loan that is secured by real estate, is normally for only a shorter time frame and is funded by a private lender and not a traditional bank or lending institution. Hard money terms tend to range from about one year to as long as five years. The loan requires a monthly payment which is comprised of principal and interest or in some cases only interest as well as a final balloon payment at the end of the term.

One of the great benefits of hard money loans is that the approval for the loan is not based on the borrower’s personal credit history or even his or her income. This fact makes it much easier for someone who has less than perfect credit to qualify for hard money. The main qualification for a hard money loan is the property’s current market value. The lender uses what is called the loan to value ratio to determine how much money can be borrowed. In most cases, the lender will loan no more than 70% of the current market value of the property. This is the lenders limit so that there will always be equity in the property. In the event of the borrower defaulting on the loan, the lender has the ability to sell the property to recover his or her full investment.

Hard money lenders are normally willing to offer loans for almost any type of property including an investment single-family home, multi-unit properties, commercial properties and even land parcels. This broad range of properties makes hard money a great for construction loans for a speculative property, fix and flip investors, and the purchase of large investment residential or commercial properties.

Who Can Benefit From Hard Money Loans?

Real estate investors tend to favor hard money for many reasons. First, the loans require much less documentation and application paperwork. In addition, the loans fund in as few as 5 days which is substantially less than a traditional loan which can take months for approval. Making an offer to a seller and specifying that the buyer is using hard money, is often seen as a huge advantage by sellers and can set an offer apart in the event of a multi-offer property sale.

No Credit – No Problem

Borrowers who have no credit or have a poor credit history are not going to be able to secure a loan from a traditional lender. But hard money offers those borrowers a legitimate option for their lending needs. Understanding what hard money is and how the loans can be used is an important step in making the best choice when searching for a loan.

Owner Occupied Hard Money Loans

There are conventional loans and hard money loans for owner occupied properties. Learn the upside and downside of owner occupied hard money loans.

You may have heard of “hard money” loans for construction purposes. Private hard money loans are actually used for multiple investment opportunities including consumer purpose/owner occupied hard money loans. If you intend to occupy the property you are seeking to purchase, then you need to look into consumer purpose and owner-occupied loans. The borrower intends to occupy/live in the property that they are seeking the loan for—In other words, your primary residence. These types of loans can be used for paying a tax lien, helping a family member, or bill consolidation, as long as the loan is tied to any form of real estate.

Since the financial crisis of 2008, the tighter lending regulations, closing time frames, documents and disclosures involved, and borrower protections has led to the whole process with private lenders being one that is overly onerous. A great Plan B could be private consumer loans. Properly underwritten and compliant are appropriate for borrowers who cannot qualify for Plan A (conventional loan).

If you are a real estate agent or mortgage professional, your clients may want to utilize this loan source if they do not qualify for a conventional loan and do not want to lose the purchase of a home.

Consumer Bridge Loans

The consumer bridge loan, short term in nature, is a good loan to consider when you’re in a time of near-term challenges or when conventional financing is not an option. Here are the many reasons for securing a bridge loan:

· If you have a home to sell AND looking to buy a home.

· If you are looking to downsize and do not want to “double move”.

· Bankruptcy, foreclosure, short sale or job time.

· Challenges when it comes to down payment.

· Personal situations such as divorce or probate situations.

· If you are seeking to avoid tax, and do not want to liquidate other assets (stocks, 401K, etc.…).

· 1031 exchange’s

· Fallout from a reverse mortgage

Terms are usually as follows: 5 to 7 days to close, requires a purchase component, a maximum term of 11 months, a typical interest rate of 9.9%, and 2-3% points plus doc and admin fees.

Long-term private consumer loans, although less common, can help individuals in certain situations.

One of these scenarios is a person with credit challenges that cannot be resolved in 12 months. Credit seasoning is a term to describe the time it takes a borrower’s credit to reach a level to qualify for a conventional loan. Another reason for this type of loan is that the borrower has not been in their current position for 24 months. The borrower may qualify for the long term 30/30 loan: A 30-year loan with fixed payments on 30-year amortization.

Additional reasons for a 30/30 loan include: self-employed, hard to document income, income history inconsistent, credit issues, bankruptcy, already own home and you need to refinance, and the purpose is consumer in nature. Terms may include the following: could close in as little as 5-7 days, no prepayment penalty, interest rate of 8.99%-9.99%, and 2-3 points plus doc & admin fees.

Word of caution: If the lender tells you that they can do a loan that does not fit into the above guidelines or seems “to good to be true,” check reviews and backgrounds before proceeding. You can be assured that when obtaining a loan with Level 4 Funding, you’re working with ethical, knowledgeable individuals that have been in the business for over 20 years. Call us for a no-obligation quote.

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Qualifying for Owner Occupied Hard Money Loans

There are many reasons why a borrower would consider owner occupied hard money loans. Consider these motives when making your next decision on where to obtain financing for an owner-occupied property.

You apply for a conventional residential mortgage from your local bank or credit union only to be turned down. Don’t give up on your dream. Your other option is a residential hard money lender for your primary residence. This can be a viable solution in the following scenarios:

· Your credit is classified as poor

· Your history shows a recent loan modification, short sale, bankruptcy or foreclosure

· You currently joined your employer and have less than 2 years of provable employment

· You have your own business and are classified as self-employed

· You are seeking a bridge loan for short term purposes

You locate the perfect residence and receive a conventional mortgage only to find out your lending bank or credit union is unable to perform while in escrow. Now is a good time to consider owner occupied hard money loans. The approval and funding process of a residential hard money lender is much short that a conventional bank or credit union which will keep you from losing the investment property. After the house closes, you always have the option to refinance with a conventional loan. Since Dodd-Frank, many lenders will not even consider residential owner occupied hard money loans because:

· Additional documentation is required

· The hard money lender requires additional licenses

· Time to fund the loan increase due to mandatory recession period

· Compared to investment loans, the residential hard money loan has additional risks

A very small amount of Hard Money Lenders will provide owner occupied business purpose loans, however the borrower only benefits if:

· They own the primary residence

· The primary residence that the borrower owns has a sufficient amount of equity

· The funds the borrower receives will be used for a business purpose

Hard Money Loans for Consumer Purposes

Lenders are few and far between when a borrow wants to obtain owner occupied hard money loans for a property. If you plan on living in the home, this will be considered a primary residence purchase. If you are seeking to cash-out for your equity, this also classifies you as a primary residence loan. If the funds of the loans are to be used for family, personal, or household use, then regulators will classify the loan as a Primary Residence loan

Subject to Federal regulations are residential hard money loans due to Dodd-Frank which requires a lender to verify both the borrower’s expenses and income. To verify income a borrower can submit W2’s, pay check stubs, or tax returns. A borrower will be required to keep their debt-to-income within the required ratios.

A residential hard money loan is intended for a short period of time, usually 3 to 5 years.

Before closing the loan, a borrower will be required to submit a plan to obtain long-term financing, or a different exit strategy, depending on the situation. At Level 4 Funding, we can help you come up with the best solutions to your present funding needs. Give us a call to discuss your unique requirements. The world of real estate investment is creating millionaires every day—don’t delay on taking those first steps into a very lucrative business.

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Sunday, August 5, 2018

Learn About Hard Money Loans Before You Take the Plunge

Are hard money loans too good to be true? Learn the truth about this often-misunderstood investment opportunity.

Are you a typical real estate investor seeking the best opportunity and the next best purchase? While years of experience often affect the pursuit and tactics used to find the next property, finding ways to finance your project is faced by beginner and professional alike.

On a rental property that you are analyzing to invest in, how you will be financing your investment is always on your mind. Covering your costs that come along with purchasing your investment property is another hot topic. When purchasing a rental property, hard money loans can be used to purchase the property. A little more due diligence and investigation is to be done before committing to using this type of loan to purchase your property.

Have you been wondering just what a hard money loan is? These loans are secured by real estate and the value of the investment property rather than the credit worthiness of the borrower. The term of these loans usually has a maximum of 12 months and have higher interest rates than traditional loans. The source of the funds for these loans is from private money lenders. When Should you Consider Obtaining a Hard Money Loan?

Hard money loans are perfect partners in certain situations. Some of these are:

· Turnaround Situations

· Short term financing

· A problem in your life has caused your credit to be “challenged”. If the investment property that you are seeking to invest in has substantial equity, this should overcome any credit challenge.

Brokers offer loans through private hard money lenders to real estate investors secured by one or more properties. Unlike banks, these lenders charge higher rates and fees but move much more quickly. Their main focus is the value of the collateral (property) for the loan. There is less focus on the borrower’s financial status and credit score. A typical hard money lender may be a mortgage broker with high net worth clients who will invest in the loans. Lenders have certain criteria when deciding if they will provide hard money loans.

Hard Money Lenders Differ from Each Other in a Multitude of Ways

Some of the aspects that different lenders look at include:

Deliverability of the loan, risk of loss based on the amount/underlying asset value, borrower strength, and what the borrowers repayment plan is. Then the hard money lender will look at the property itself including: the actual worth of the property, how much improvement is needed for the property and what will the actual value be after the improvements, how easy the property bill be to foreclose on if the borrower defaults, and how quickly will it be to sell the property in the market that it is located in should the borrower default.

Remember, real estate investing is risky. Explore all possibilities and get your ducks in order before proceeding.

Rejections come in all forms, but some of the main reasons lenders turn down a loan are:

· The loan is outside of the lender’s lending parameters

· The lender wishes not to lend to a particular borrower

· The loan requirements for a loan fall outside the lenders capital

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