Popularity: 27% [?]

The changes in financing options available for residential investment properties over the last 5 years are staggering. Lenders have relaxed the credit and income guidelines for qualification that formerly deterred many would-be investors from entering the real estate. In addition, the down payment requirement has been eliminated for borrowers who qualify. This article surveys the landscape for lenders offering residential investment financing products.

Types of Lenders:

The lender landscape can be broken into the following broad categories:

Conforming
Alt-A
Non-Conforming or Sub prime
Hard Money

Each of these offers loans for residential investment properties ( 1-4 unit properties).

Conforming

Conforming lenders are the A-Paper mortgage banks that cater to borrowers with excellent credit history and the ability to document income. Conforming banks offer loan products that can be considered plain vanilla in todays world of interest-only ARMs and low down payment loans. In terms of investor loans, conforming lenders offer full doc and stated loans up to a 90% LTV. A loan from a conforming lender with an LTV greater than 80% will incur private mortgage insurance, or PMI.

Conforming lenders always require a minimum of a 620 credit score, and use a computerized underwriting process to determine approval. Besides credit score, other important factors for approval include: payment history for mortgage and revolving accounts over the last 24 months, debt-to-income ratio, employment history, amount of down payment, and the amount of liquid reserves.

Some examples of leading conforming lenders are Countrywide, Wachovia, Suntrust, and Flagstar. While these are national lenders, any local bank or savings and loan would fall into this category.

Alt-A

Alternative A credit lenders, or Alt-A, offer aggressive loan financing products catering to borrowers with credit scores from 660 and up. While these lenders offer programs to borrowers with scores down to 620, the aggressive programs are typically not available to borrowers below a 660 middle score. Alt-A banks have driven the creation of innovative loan products over the last few years.

These programs include the many interest-only products, the Option Arm loan, loans requiring as little as 5% and now no down payment, as well as standard fixed-rate and arm products. The big difference with these lenders is the relaxed debt-to-income ratios available, the reduced income documentations (stated income, no income / no asset, and no doc), and the ability to add interest-only to most products. Alt-A lenders have popularized the use of 80-10 and 80-15 loans for investors to avoid PMI.

Some examples of leading Alt-A lenders are Aurora, GreenPoint, SunTrust, First Horizon, and IndyMac. Besides these, there are literally hundreds and hundreds of lenders that have emerged to fill certain niches.

Non-conforming / Sub prime

Non-conforming or sub prime lenders fill a growing niche borrowers with past credit problems. These lenders offer fixed and adjustable loan programs for borrowers with bankruptcies, foreclosures, judgments, tax liens, charge-offs, and many other credit blemishes.

These lenders typically price their loans using a matrix that evaluates credit score in relation to loan-to-value. Sub prime lenders will offer financing to borrowers with as low as a 500 middle score, and even have programs that cater to borrowers with excellent 700+ scores. The sweet spot for most of these lenders is a 580 or better middle, as they will provide 100% financing for owner-occupied properties at that score. For investors using sub prime lenders begin to offer products for borrowers with a 550 credit score.

The important thing to understand about these loans is that they are priced much higher than a conforming or even Alt-A loan.

The most popular product with these lenders is a 2-year Arm, with the idea being the borrower will refinance or sell the property in 2 years. Also very common with these lenders is a mandatory 2 or 3 year pre-payment penalty.

Some examples of leading Sub prime lenders are LongBeach Mortgage(division of Washington Mutual), Fremont Investment and Loans, Meritage Mortgage (division of NetBank), and New Century Mortgage. Besides these, there are literally hundreds and hundreds of lenders that have emerged to fill certain various sub prime niches.

Hard Money

Hard money lenders serve a very simple purpose they allow the purchase of fixer-upper or rehab properties with no money down. These lenders offer programs that none of the

Hard money lenders are typically private individuals or small companies that make very high interest rate loans (between 12% and 18%) based on the after repaired value of a property. They will lend the money to both acquire and fix-up the property, up to a LTV of 65% or 70%. The loan term for most hard money lenders is 6-mos.

These lenders are a great, albeit expensive, way to purchase rehab properties. After doing the renovation, one can refinance out of the hard money loan with a conforming/Alt-A/Subprime long-term loan.

Wide Range of Products
Some of the various products that are available today include:

100% investor loan 1 loan or 80/20
Credit scores begin at 660 only available from Alt-A lenders
95% investor loan 1 loan or 80/15
Credit scores begin at 600 available from Alt-A and Subprime lenders
90% investor loan 1 loan or 80/10
Credit scores begin at 620 for Conforming and Alt-A lenders and 560 for Subprime lenders
80% investor loan
Credit scores begin at 620 for Conforming and Alt-A lenders and 560 for Subprime lenders

All of the above can be found in either a fixed or ARM, and can usually have an interest-only option added to help maximize cash-flow. While any loan with a LTV above 80% will typically incur PMI, you can avoid this unnecessary expense by piggy-backing a first and second mortgage together eg. 80% first and a 15% second.

The above is a real brief introduction to the residential mortgage landscape, and should help orient new investors to the available lenders and products available.

Author: Brian Anderson, Broker, Anderson Lending Group. You can contact Brian directly at: brian@andersonlendinggroup.com. Learn more about Anderson Lending Group and the wide variety of investor loans available by visiting: http://www.andersonlendinggroup.com . You can apply online and receive a pre-approval within hours.

Popularity: 27% [?]

If you have tried to get a traditional mortgage, or even a hard money loan, to finance your real estate investments you know how hard it is to get loans in today’s post-credit bubble market. It is even harder to get “no money down” loans for your real estate investing business. If you are using traditional mortgage or hard money loans they can take two or three months to close. The problem you will quickly discover is that sellers are not willing to wait that long and get angry at having to continuously extend their contracts or wait for your loan approval.

Banks and mortgage lenders view mortgage loans to real estate investors as a higher risk than loans to home owners. They believe if the home owner is not living in the property and if trouble hits an investor will opt to pay their own home mortgage first and only pay for the investment loan if they can afford to make the payments. This puts the bank in a very poor position. As a result, most banks are looking for real estate investors to put up 30% to 50% down payment to protect their interest in time of trouble. VERY few investors have this kind of cash so it is very difficult or impossible to do deals with traditional mortgage or hard money loans.

Real estate investors still are not advised to use their own money to do their deals. Even if you have 30-50% saved for a down payment on your investment property, most real estate guru’s warn, NEVER spend your own money on real estate investments. Most beginners start their investment career saving up for a down payment, but the fact is, serious real estate investors do not use their own money to do real estate deals.

So how do you buy real estate investments if it is so hard to get a loan and you do not want me to use my money to apply to a down payment?

Buying real estate without using your own money IS possible, and it’s not difficult. With the right kind of deal, investment property can be purchased without a single penny of your own money.

Enter the world of Private Lenders… Private lenders are individuals with money to lend for investment purposes. They may or may not be wealthy, but they do have excess cash or assets available over and above what they need to live on. These individuals are willing to lend for a higher return than they can get with bank CD’s or money markets. There are no limits on the number of private lenders you can have or the number of real estate deals you can do using private money.

I invite you to learn more about Private Lending and get my new FREE 20-page ebook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by clicking here http://realestatewealthtoday.com/FREE-eBook.html

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Presentation Kit.

Popularity: 14% [?]

How many of us have found a great deal but, for various reasons, just could not secure sufficient financing to make it work? Or how many of us have been in a deal where we needed refinancing but could not get it on the terms that we wanted? When that happens, we end up watching that opportunity pass us by – and in some cases there was a solution!

There was a way you could have secured the financing you needed to close that deal.

Private lending is often an overlooked solution to financing problems. is conceptions, myths and mystery surround private lending.
There are a variety of lenders that could be called private lenders, for which the fees and costs of financing vary substantially. The focus of this article is to discuss private individual lenders, not institutions or investment corporations. The private individual lender can be difficult to access and so many borrowers end up with private institutional lending which can be more costly when fees are added in. Some of the benefits to using a private individual lender is that, in many situations, there are more opportunities to customize the mortgage that the borrower needs and, in many deals, fees can be lower than other institutional private sources.

How does private individual lending work?

A mortgage broker who specializes in private financing can help a borrower find an individual who will lend ‘privately’ (i.e., not through a bank or institution but directly on their personal behalf) on a property. An individual lender seeks a better return than bonds and does not want the risk of the stock market; instead, an individual lender wants to make money off of real estate without directly owning it.

A private mortgage is generally short term in nature (typically 12 months), is secured by real property, and the return is the interest that the borrower pays with, possibly, a lender fee.

The lender will make an offer on the mortgage stating the terms that they require to lend the mortgage. There can be a negotiation and private lending offers opportunity to tailor mortgage requirements more so than an institution who only offers certain mortgage products that may or may not be open and may or may not have other requirements. When an agreement is reached, a lawyer or notary will prepare the necessary documents and a charge will be registered against the property just like any other mortgage. Private financing does cost more that conventional financing, and private money is a market like any other which is moved by supply and demand; the price of which fluctuates accordingly.

The following are some of the situations where private financing offers significant benefit:

1. A private lender, may lend more on the basis and merits of the property so if a borrower has less than perfect credit or lack of credit or has a difficult time proving income but the property itself holds good value, the latter can make the deal work for a private lender whereas a conventional lender will decline it.

2. Private borrowing can also work for properties which are held in a trust, even a foreign one. Most banks won’t lend to a trust because they require a personal guarantee.

3. Private lending is also a good solution for temporary needs, such as when a borrower feels that in a short time their credit may be good enough to get conventional financing or if they are waiting for another deal to close in order to release funds to use for the new deal. This works well with private money because most private mortgages are for relatively short terms, 12 months or 24 months.

4. Private mortgages can even be negotiated to be ‘prepaid’ mortgages, such as when the borrower doesn’t want to make monthly payments; this way the borrower simply pays the whole amount (including the capitalized interest amount) back at the end of the term. This especially makes sense for someone who is selling their property and knows they will have the funds to payout the mortgage within a year.

5. Private lending is also a potential solution if the location of your property is outside of where a conventional lender is willing to lend.

A private lender has the same rights as a bank when it comes to being paid. If the mortgagor is behind on payments the private lender has the right to pursue foreclosure just like a bank would in accordance with provincial or state laws. As well, if payments are late, it is typical for a charge to be added which would be defined in the mortgage agreement. Some private mortgages may require the borrower to have life insurance but it is not necessarily a standard clause. What is important to remember is that for the extra cost of financing the borrower has the opportunity to negotiate what terms are important to them to make the deal work and a private mortgage broker can help with this as a mediator between the borrower and the private lender.

Private lending might be the right solution for you, but it’s worth nothing that it is not a solution to buy property with no money down. Realistically, in the current market, most private lenders will not lend above 80% of the property value, so you need to have at least 20% equity (and commercial properties need even more). Private mortgages can be in first or second position, and possibly a third depending on the amount of equity. They can be used for residential, commercial and even in construction financing.

I invite you to learn more about Private Lending and get my ebook titled Private Lending Secrets for Real Estate Investors! by Clicking Here Now!

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Presentation Kit

Popularity: 60% [?]

I was scrolling through Twitter posts the other day and one of the people I follow had posted this joke:

A man walks into the bank and says to the bank manager “I’d like to talk to you about a loan”. The bank manager says “Great! How much can you lend us?”

I laughed because Dave and I had gone into the bank earlier in the week to make some large cash withdrawals. We owed my brothers a bit of money for their help with our rental property renovation in June, and we had to juggle money around to a few different accounts for property taxes and other upcoming bills. When we started giving the bank teller the sums of money we were going to withdraw, she started to panic saying that we should have called the bank ahead of time to let them know that we were going to be taking out more than a few thousand dollars in cash.

“But – you’re the bank! If you don’t have money, who does?” I was thinking.

Of course we smiled and apologized and eventually they were able to round up enough cash to meet our requests.

We had to laugh though – if you can’t go to the bank to get money where can you go?!

Of course, you might feel the same way when it comes to finding money for your real estate deals! The lenders have added so many restrictions that people all over North America are finding it darn near impossible to find financing for rental properties. In Canada, in particular, the regulations have changed so much in the past few months that people with multiple properties (like us!) are faced with a mountain of paperwork and a whole lot more trouble than ever before.

But, as we’ve said over and over, we don’t focus on the obstacles we’re facing. Instead, we place our attention on the ways we can get around those obstacles. One way to get money for your deals is to turn to a private lender.

I invite you to learn more about Private Lending and get my ebook titled Private Lending Secrets for Real Estate Investors! by Clicking Here Now!

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Presentation Kit

Popularity: 13% [?]

Wow, has the real estate market changed in 2009! Real estate investors have been shut out of traditional mortgage money unless you have a 9000 credit score and a 50 year work history without missing one day of work (ok enough of the weak humor but you get the idea). Even hard money loans are HARD to get as they have all gone out business.

But just as the mortgage market is shunning the real estate investor – we are starting to see signs that the real estate marketing is starting to bottom and home prices have even gone up in some markets.

So how do you take advantage of this buying opportunity if you can not get mortgage money from traditional sources?

Private lending is the answer. You can start borrowing money from private lenders to fund your real estate investments. Raising private money allows you to take advantage of the low prices without ever using any of your own cash or personal credit.

There are several significant benefits and advantages of private money lending compared to mortgage money or hard money lending.

First, you can begin buying more houses for “all cash” offers and drive significant discounts from sellers who are highly motivate to get cash versus waiting and hoping another buyer will get a mortgage approval.

Second, very simple paperwork with a typical private lender transaction only requires 3 or 4 documents with less than 20 pages.

Third, you control the terms and conditions under which you will borrow money and the lender will lend. You tell the lenders what rates of interest you will pay, how long the term is and all the other conditions are set by you not a bank or hard money lender.

Finally, you can turn many non-deals with no equity into super profitable deals with substantial equity by paying off existing debt at a discount… using private money.

Six Steps to develop a private money program for real estate investors:

1. Develop your private lending program and the terms and conditions under which you will borrow money and repay your lenders
2. Build your info/credibility kit to establish yourself as real estate investing expert
3. Create a marketing plan with 5 to 10 different marketing techniques to attract potential private lenders
4. Create your group or one-on-one presentation
5. Schedule group or one-on-one meetings and follow-up with potential lenders
6. Present and close deals with your potential lenders

Given the new market realities, private lending may be the only option if you want to buy and own real estate investments and take advantage of the low prices.

I invite you to learn more about Private Lending and get my new FREE 20-page ebook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by clicking here http://realestatewealthtoday.com/FREE-eBook.html

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Presentation Kit

Popularity: 19% [?]

One of my coaching students recent asked me how to raise money for real estate deals since she was having NO luck raising money through hard money lenders. In fact, she had just paid some “guru” $25,000 to take a course and the whole course was about how to raise hard money.

Once she and many of the other students in the Guru’s class start talking they discover that no one was having any luck raising money with money hard lenders. They quickly learn that most hard lender money are out of business. The few that remain have such high lending requirements that the deals made no sense when you have to put up 50% of the proceeds, sign personally, put up cash reserves and pay interests north of 25%.

She was very confused and upset to pay this kind of money to get information that was grossly outdated and useless in today’s world.

I quickly explained that the answer of how to raise money for real estate deals today is to use “private money” not hard money. The difference is with private lending you are dealing directly one-on-one with a private person who may want to invest in your business. You are not dealing with banks or hard money lenders who have no money in today’s post financial crises.

Private lending is a consistent source of money to purchase discount real estate deals that you can go back to again and again and again. The more you use private money lenders, the more money that will become available as you as you develop that relationship.

It is important that real estate investors understand that for the next several years you will need to use and develop a private lending program as other sources of money will dry up and be very difficult to get.

I invite you to learn more about Private Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by going to http://realestatewealthtoday.com/FREE-eBook.htmlPrivate Lending Secrets

Popularity: 17% [?]

With traditional mortgage and hard money lending getting tighter and tighter for most real estate investors – private lending is fast becoming the only option to finance your deals.

What is private lending and how is it different than traditional lending? Private money is a type of mortgage financing that is usually provided by private people who have extra money that they are willing to lend at higher rates than they could get at banks or CD’s. Their investment is usually secured by the property you are buying and NOT by the borrower. Unlike traditional mortgage lending, the terms and conditions of private lending will vary from person to person and usually depends on the agreement between a you and the private lender.

Borrowing money from private money lenders is much easier compared to traditional banks and hard money lenders. Because you only need to get the approval of one person and you do not need to deal with 4 inches of paper work and a 3 to 4 month approval process only to get reject later. In addition, you will not have to present lengthy documents and other personal credentials such as proof of income in these types of loan transactions. Private lenders first want to know the real estate investment makes economic sense first before they worry about other issues.

Real estate investors with poor credit scores can still borrow money from private lenders if they are prepared and the deal makes sense. However, they must be able to show that their real estate investment makes sense and will generate enough rent to cover their interest payments and the property collateral is worth more than the loan amount. For example, if an investor wants to borrow $125,000 from a private lender, he has to make sure that the collateralize propertys market value will is $175,000 with an appraisal once the repairs are completed.

One reason why many real estate investors prefer private money over business partner is that private money is less expensive. Most private lenders ask for interest rates in the 8% to 15% range while business partners are likely to demand a larger portion of the profits when you sell a property.

The key to getting private money is to be prepared and have a well thought out business plan and credibility kit. Without these two items in place it is hard to image a successful business person giving you money if you do not impress the person with your well thought out business plan. Take your time and be prepared to answer all the questions about the property such as what are the value of comps, what are rents in the area and what are the cost to fix up the property. Also spend some time to develop your credibility kit to show your experience and knowledge as a real estate investor.

I invite you to learn more about Private Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by going to http://realestatewealthtoday.com/FREE-eBook.html.

Mike Lautensack is a full-time real estate entrepreneur in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lender Money Kit .

Popularity: 8% [?]