Learn To Be A Fix & Flip Investor: arizona sub prime mortage

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Saturday, March 31, 2018

How to Qualify for Commercial Real Estate Loans

Understand that commercial real estate loans are nothing like residential loans, which means that the qualifications are drastically different as well. Understanding the qualifications before you apply for a loan is critical to securing the fund that you need.

First, it is important to grasp that commercial real estate loans and residential real estate loans have nothing really in common other than the word loans. The comparison is similar to that of a paper airplane and a jumbo jet; yes they both fly. So be prepared to learn about an entirely new set of loan qualifications before you embark on your first commercial loan application.

Lenders base a huge portion of their decision on your personal credit score when you are seeking a residential loan. And it is always good to have a respectable credit score, but it is not as critical when seeking a commercial loan. A credit score of below 600 will require an explanation but it is not a deal breaker. But a credit score of under 500 is likely to reduce your opportunities quite a bit. What lenders will be looking for to approve commercial real estate loans is a solid net worth. In general, lenders would like to see a net worth equal to the amount of the loan you are requesting.

Another important factor to qualify for commercial real estate loans is liquidity. The standard for liquidity varies among lenders but the rough average is 10-20% of the loan amount. What lenders don’t want to see is a borrower who scrapes up every last dollar that they have to make a down payment. Being cash poor could have catastrophic results if there is an unexpected expense which arises or some other type of emergency.

Your Experience

Your experience will also be a key factor in your approval. Demonstrating that you have the ability to manage the new property successfully means that you are most likely going to be able to make you payments on time and for the life of the loan. And if the property is quite large, the lender wants to know that you have the resources and staff in place to handle the management and ownership responsibilities associated with the property.

Income

As with any loan, there is a certain expectation for income. You need to have the income to pay the loan payment each month. This might be in the form of rental income once the property is up and functioning or it could be revenue from the business which is housed on the property, but the cash flow needs to be there to make the payments. Unlike on a residential loan, there is not real ratio such as debt to income that the industry uses as a standard. But you do need to demonstrate that there will be some type of cash flow to cover the loan payments for the life of the loan. All of these factors are blended to determine your ability to make the monthly payments on the loan that you are requesting unlike in a residential loan application where most of the weight rests on your income alone.

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Sunday, March 25, 2018

Can you make money by investing in hard money loans?

Consider using a deed of trust investment. A deed of trust investment allows you to earn steady returns and interest payments on the loans distributed by hard money lenders.

Deeds of trust may be an unfamiliar concept for many first-time real estate investors. A deed of trust is a promissory note in which a borrower promises to pay back the lender (i.e., you the investor). Your investment goes to the borrower in the form of a loan, and the borrower's property acts as collateral in case of default. You earn both the interest payments and any portion of the principle the borrower manages to pay off throughout the term of the loan. Because a real property secures them, deeds trust are relatively safe and can offer steady returns to novice real estate investors.

Investing in a deed of trust is also a great way to diversify your portfolio. A deed of trust investment allows you to act as a passive owner and earn income from a property without owning it outright. You also save money because you will not need to purchase the entire property upfront and you avoid the hassle of maintaining the property yourself. Deeds of trust can also offer higher returns over an ordinary saving or an investment account.

Use a hard money lender to get the help you need when it comes to investing in deeds of trust

Trust deed investment companies (TDIC's) connect investors with deeds of trust and usually known as "hard money" lenders. The loans issued by these groups are secured by the value of the "hard" asset which the borrower wants to finance. Often TDIC's use deed of trust investments as a way to raise capital for the loans they issue to prospective borrowers.

Some may consider merely acting as private lenders on their own behalf. If you have the money and you want to earn interest, you could always lend the money yourself.

Working with a TDIC allows you to benefit from their knowledge and experience when it comes to the real estate market and the rules and regulations related to lending. The lender can underwrite the loan, take care of legal obstacles, perform the necessary due diligence and in some cases service the mortgage directly.

Level 4 Funding is an Arizona based hard money lender and can guide you through the process of investing in deeds of trust

Level 4 funding will perform the necessary due diligence on any deed of trust investment, ensuring any mortgage you invest in is of the highest quality. Level 4 funding differs from other TDIC's. Because Level 4 has already issued any mortgage you invest in whereas competitors may need your investment to fully finance their loans. With Level 4 Funding you have added the safety of knowing that any loan invest in already has a steady payment history.

To qualify you will need to make a minimum investment of 50,000 dollars, and your investment cannot exceed 10 percent of your total net worth or annual income. For more information about a deed of trust investment at Level 4 funding click here.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Friday, February 6, 2015

Bad Credit and Arizona Real Estate: Qualifying for a Subprime Mortgage Arizona

An Arizona subprime mortgage allows borrowers with bad credit to purchase real estate in the Grand Canyon State. Knowing the types of mortgages available will help you choose the right mortgage product and save you money.

With great weather, a stable economy, and a real estate market with great deals, it is no wonder that so many people want to move to Arizona. With some parts of the state getting over 300 days of sunshine each year and skiing in the northern part of the state, it is the perfect place people with any climate preference. The relatively low humidity also makes it ideal for people with respiratory problems and mild winters are great for snow birds. If you find yourself dreaming of moving to Arizona, but have bad credit, you will want to start researching Arizona sub prime mortgage to learn about the different types of mortgages available in the state for borrowers with bad credit or high debt to income ratios. If you cannot qualify for a traditional mortgage due to a low credit score, a subprime mortgage might be a good option.

A subprime mortgage is a loan given to a borrower who is considered to be a higher risk due to a poor credit score. Typically a sub prime borrower has a credit score of less than 640, but this does vary. Since the lender is assuming a higher risk, the interest rate is also generally higher. Critics of subprime lending argue that it charges unfair interest rates and further burdens individuals with low incomes and high amounts of debt. However, for many individuals, a subprime mortgage,Arizona is the only way they can qualify for a home loan. There are several types of subprime mortgages available and each type has different advantages and risks.

Although subprime mortgages generally charger higher interest rates, for almost 42.5 million Americans, it is the only home loan they can qualify for due to a low credit score. If you find yourself having trouble obtaining a home loan in Arizona based on your credit, do your research on subprime mortgage Arizona to determine the type of loan programs you may be able to qualify for. Knowing the different types of subprime mortgages can help you select the right product for you and your family.

Types of Mortgages Available to Borrowers with Bad Credit

One type of mortgage available to subprime borrowers is what is known as an adjustable rate mortgage or ARM. An ARM starts off at a low interest rate, usually lower than the prime rate around 2-3 percent. After a period of time from 1 to 5 years, the rate then adjusts to a much higher rate anywhere from 10 to 20 percent, depending on market conditions. This will cause your payment to go up rapidly. ARMs got a bad reputation during the housing crisis of the mid 2000s and were accused of being a way for banks to loan money to and take advantage of subprime borrowers. Many people lost their home due to the inability to make the new, higher payments after the rate adjusted. An ARM can be a good option if you are in the process of rebuilding your credit and will be able to refinance to a traditional loan before your rate adjusts. It is also a good option if you are buying a short term home to either fix and flip, or you plan on moving within the low rate period. An ARM is also a good option as long as you budget accordingly so you do not get priced out of your home and wind up unable to pay your mortgage.

A second, less common type of subprime loan is a hard money loan. A hard money loan is offered by a group of investors, rather than a bank. It is a short term loan that is designed primarily for fix and flip houses. Since investors are offering the loan, not a bank, they are more likely to give loans to borrowers with low credit, providing they have a sound real estate investment. Hard money loans are usually short term loans and last for a couple years. A hard money loan is a good investment but not if you are planning on living in the home for any amount of time.

Another program that is available to low credit borrowers is an FHA loan. This type of loan is backed by the federal government and offers low interest rates and low down payment options. Most FHA loans only require a 3.5% down payment which makes it a great option for borrowers without a large amount of liquid cash assets. This is also a great option for someone buying a second home who may not have the down payment they would have if they sold their first home. The loan is insured by the government so the borrower will end up paying what is called primary mortgage insurance or PMI payments. PMI payments can range from anywhere between 80 and a few hundred dollars so it does increase your monthly mortgage payment. You will make these payments until you have paid off 20% of your home loan.

Deciding on the right loan product is essential to making your sub prime borrowing experience positive.

Talk with a mortgage broker to further discuss your loan options. You may also qualify for certain federal programs that offer down payment assistance or cash back at closing. Some of these include the Home in 5 program or the Home Affordable Refinance Program (HARP). Call an Arizona mortgage broker to help get you started on your move to the Grand Canyon State.

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Tel: (623) 582-4444 | Fax: (888) 279-6917

www.level4funding.com
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

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