Updated: Jun 3, 2022
Banks used to be the only option for real estate investors trying to take out loans. Nowadays, private money lenders are allowing investors to borrow money under more flexible conditions. Banks and traditional financial institutions can reject your loan application for multiple reasons—your credit score, your debt-to-income ratio, employment status, etc.— What private money lenders do is implement a framework that makes it easier and more conducive to be a real estate investor.
The real estate market moves fast, and it is often crucial to act quickly. But the process of getting a traditional loan through a bank can often be lengthy and complicated. Many of the solutions and loan programs from private money lenders are easier and quicker to get than through banks, which is why private money loans are often better options for real estate investors.
Making investing easier
What private money lenders like Stratton Equities do is accommodate real estate investors.
“Real estate investors, as we all know, don’t have the greatest of tax returns,” Stratton Equities’ CEO Michael Mikhail said. “They move money around, have different trusts, and have different accounts. Banks absolutely frown upon that and they actually hate it. Good luck getting a loan through a bank or mortgage company if you’re a hardcore real estate investor.”
The programs offered by private money lenders are designed for investors, who oftentimes can’t show their income and make a lot of monetary transactions. Companies like Stratton Equities have put in place certain standards that make it easier to take out a real estate investment property mortgage. These include no tax returns, no upfront fees, and no junk fees.
The closing time for loans from private money lenders is much faster. This element can be crucial for investors, as sometimes the faster you close, the better chance you have at securing a transaction. Also, the LTV (loan to value) ratio is higher with private money lenders. Loans from traditional institutions on investment properties usually max out at 70% LTV, while those from private money lender Stratton Equities can go up to 85%. You’ll likely be spending less through private money lenders too. “If you go to a bank, you’re going to have PMI (private mortgage insurance) with those loans, a few extra hundred dollars per month,” Mikhail explained.
The Loan Process
The first thing you’ll want to do to get a private money or NON-QM loan, for example a hard money loan is to contact a private money lender. As the borrower, you should be ready to provide the lender with information like the location of the property, purchase price, and estimated appraised value.
The lender will ask questions to get to know you and your borrowing history. After this, the lender will appraise the property and come up with a loan offer for you. The lender will review the documentation and complete the underwriting process for the loan. This process is usually speedy, but it varies from lender to lender.
After the loan is completed with underwriting it gets moved to the closing department. As a borrower, you’ll have to sign a variety of documents during this phase, but it is relatively straightforward. The lender will then send the funds to the title company so the deal can be completed.
Many real estate investors have found that getting loans from private money lenders is their best option for achieving their investment goals. Be it a hard money or a soft money loan, private money lenders are faster, more understanding, and more lenient than mortgage companies and banks. You have to consider that these companies’ sole purpose is to give loans to real estate investors, so naturally, they’ve found ways to make the process smoother. If you’re thinking of getting into real estate investing, you should definitely take these factors into account.
Contact Stratton Equities, the leading hard money and NON-QM lender, to speak with one of their talented and experienced loan officers at 800-962-6613, email us, or apply for loan pre-qualification today!