Stated Non Conforming Commercial and Investment Real Estate Loans Nationwide

Non Conforming Real Estate Loans

Will lend from $50,000 to $5,000,000 on commercial and investment real estate nationwide at competitive rates and terms. If your project does not qualify for bank financing but you do not want hard money terms this could be the program for you.  Typically to qualify for bank financing there is a minimum loan requirement, a minimum credit score, a minimum debt service coverage ratio, as well as other minimum requirements that you just barely did not meet. With make sense underwriting you can qualify for good rates and terms. This lender deals with commercial mortgage brokers nationwide.

Minimum Loan Amount

The minimum loan amount is $50,000. For commercial real estate this is very aggressive. Most banks have a minimum loan amount of $250,000, $500,000 or even $1,000,000 or more. Many agency programs start at $2,000,000. Therefore, many borrowers looking for small cap commercial funding will have a hard time acquiring the financing they need. With the low minimum requirements this fund is able to finance many borrowers that are otherwise left out. This is a great option for commercial mortgage brokers to add to the programs they offer.

Minimum Credit Score

The minimum credit score is 580. There often is a misconception by borrowers in that they believe that if there credit score meets the minimum they qualify for financing. This is rarely true. Rarely! The minimum credit score is only used to deny a loan, rarely to approve a loan. What is most important is the actual credit profile. A client with a 720 credit score and only one tradeline for $300 that is as an authorized user is not more credit worthy than someone who has a 580 score with ten accounts all maxed out yet they have a perfect payment history for the last 2 years. With that said the the fundability of any project is based on the toatal package. A project where; the loan to value is low (the equity is high), the debt service coverage is high, the property is fully occupied and has been for years with long term leases, and the borrower has substantial experience owning and managing these property types will most assuradely be financed in this program, even if the borrowers score is below 600. Likewise, that same borrower with no management or ownership experience, maximum loan to value project with low debt service coverage will not qualify. Most Commercial mortgage brokers understand the opportunity for their clients with less than perfect credit.

Minimum Debt Service Coverage

1.25% debt service coverage ratio is pretty standard in the industry. This program adheres to that for projects where the borrower has low credit scores. But if the borrower has good credit and experience owning and or managing the property type, the property could be vacant with no immediate debt service coverage and the project could qualify for financing.

Stated Income

Many programs require the borrower to verify their income. These programs often have a “global” debt service coverage ratio. This means tha in addition to the property generating enough income to service its mortage and cover all debts associated with it plus make a profit, the lender will review the income and expenses of the borrower plus all of the prooperties they have financed. The total income and expenses of all the borrower owns will be analyzed to determine if there is suffifient income to cover all expenses plus make a profit. Because this is a steted income program the only thing the underwriter reviews is if the property has an acceptable debt service coverage ratio. No tax returns are required in most cases. In the event they are it is just for post closing loan commitment for the file. Mortgage brokers like this option.

Property Types

Most property types considered. Any properties owned or being purchased for business and investment purposes are considered. This includes non owner occupied residential one to four unit properties, multifamily, mixed use, single and multiuse properties. Hospitality, churches, and funeral homes also are acceptable. Excluded projects are land, fix and flips, gas stations and any property with environmental hazard.

Other Underwriting Considerations

There are many other items that go into an underwriting decision such as down payment amount, cash reserves, borrowers ownership and management experience and property considerations . The good thing about this program is that given the entire picture there is flexibility to make exceptions for compensating factors. An example of this was an individual who was co owner of a home with his son, that he let pay the mortgage but the son was regularly 30 days late and sometimes more. The borrower was in insurance executive who made over $200,000 annually plus had liquid assets that were greater than $3,000,000 and he was looking to borrow $1,000,000.00. We could easily see that the problem was the son as all other debt was paid as agreed. No brainer even with the low credit score.

Finally

If you are a commercial mortgage broker and have a project that you need stated income, non conforming commercial or investment real este financing that offers bankable terms for the un bankable borrower.

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The Real Estate Investor Business Line of Credit

Real Estate Investor

If you are an active Real Estate Investor you may qualify for a business line of credit that will allow you to purchase, rehab, flip, wholesale or buy and hold distressed properties as if you were a cash buyer. With your credit line you are a cash buyer. This offers you many advantages including the ability to purchase properties on a moments notice and you will not have to qualify for financing. You can purchase through auctions where you get great deals. You can buy bulk real estate transactions and become a true wholesaler. This program is available for those who are active in residential or commercial investing and are established business entities such as “C” corporations or LLCs.

The Line of Credit

This is actually a revolving business line of credit secured by commercial real estate. This means the loan is made to a business entity not an individual. The collateral can not be owner occupied residential property. So in fact any company that owns real estate can qualify for the program.  This B.L.O.C. (Business Line of Credit) works like a revolving credit card were you can borrow up to the maximum credit limit, pay the loan down monthly if you choose to and then borrow up to the maximum limit again. Unlike your personal visa or master card, there is a term. At the end of the term the line is renewed, paid off, or refinanced into a different program. Also, unlike your personal visa or master card the rates are very good. The typical rates range from 4% to 8% depending on the financial strength of the company.

 

The Qualifications

There are two main qualifications for the B.L.O.C. product. First is the collateral. The lenders set the credit limit up to 65% of the property value as long as the cash flow of the business will support the loan. Secondly is the cash flow. The business must have been established for an absolute minimum of three months and have sustainable regular cash flow. To determine the cash flow the underwriter reviews the bank statements for the past three to six months to determine the ability to repay the loan. This is how the maximum credit limit is established. You will note there is no mention of personal credit score or personal income. This is a business loan and there is no minimum credit score requirements. The rates may be a little higher than the banks but the credit line is not based on your credit score and you do not have to be in business for years to qualify.

The Advantages

There are many advantages to have a line of credit versus a term loan on your property. The major advantage is cost and as a business person cost is key to all of your decisions. This is how you save money with the business line of credit. The actual up front costs to do the loan are cheaper; there is a brokers opinion used to determine value vs appraisal and the application fee is lower or non existent. The closing cost are lower; there are little or no junk fees like underwriting and / or processing. The biggest savings are in the interest payments. If you have a term loan you pay a maximum payment each moth based on the full amount of the credit limit. The line of credit you only pay interest on what you owe. And if you decided to pay down your loan you would have to apply again and incur upfront and closing costs assuming you could get approved again. The costs of the line are much lower than the loan.

The  next major advantage is flexibility which is none existent in a loan and it helps the Real Estate Investor and business owner move quickly to take advantage of opportunities at the lowest costs. Plus the property used as collateral can still be leased for positive cash flow and it appreciates and the equity grows.

Finally 

As a Real Estate Investor or Small Business Owner you could take advantage of a Business Line of Credit even without perfect personal credit. This will help you grow your business and of course make more money.

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Own to Rent / Buy and Hold Real Estate Investor Financing

Real Estate Investor Financing

Wannabe Investors, now is a great time to invest in residential properties. Whether your strategy is single family, two to four unit buildings, condominiums and town homes as well as multifamily apartment buildings the combination of great prices and accessible financing makes this an optimal period for investing.  If you are a Real Estate Investor operating in the business buying residential properties to hold for profit from the positive cash flow and equity appreciation, there were only a few financing options available. For conventional residential one to four unit properties the standard conventional guidelines limits a borrower to only have four properties financed, including their owner occupied personal residence.

Now there is a great solution for you. Even while conventional financing guidelines severely limit who can qualify (and this has only gotten worse in the past few years) there has been a rise in private lenders that will lend on residential investment properties with similar guidelines as commercial apartment financing. This is great news for the those in the business of owning and managing their own portfolio of rental property. Here are a two examples that were not often available even a few months ago.

Blanket Financing

Like all options discussed in this article this financing is for business entities, such as limited liability corporations or “C” Corporations, and not for individual sole proprietors. This is to make sure the lenders are not violating any residential lending laws meant to protect consumers as the purchase and finance their owner occupied homes. Inherently these collateral must always be non-owner occupied and used for investment and business purposes. Understanding this, it is natural that any blanket mortgage must cover at least five units. Anything less would not be considered commercial lending.

What is a Blanket Loan?

A blanket loan is where two or more buildings are encumbered and used as collateral for one loan. In other words one mortgage can cover two properties or one hundred properties versus two to one hundred loans. Could you imagine being a small business owner with fifteen or more projects that you own and are holding that each have separate loans. Generally, they are like buildings in a relatively close proximity, but that is not always mandatory. For the Entrepreneur who seek to buy and hold multiple properties for long terms the blanket loan could be a great option.  Additionally, it may actually cost less even though there are not many programs available for these small business owners.

No Seasoning Cash Out Refinance

The term “seasoning” in the mortgage world means how long an owner has owned the specific property. It can sometimes mean how old a loan is, but for our discussion seasoning is limited to ownership of property. The underwriting rules for a conventional lender requires a property to be “seasoned” or owned for at least one year for the value to be based on the current appraisal versus the acquisition costs. For example if the purchase price was $50,000, the rehab cost is $10,000 and the current appraised value is $100,000 the maximum loan would be 75% of the purchase price or $45,000. The value is $60,000 based on the the seasoning rule. With no seasoning requirement the the loan amount would be 75% of $100,000 or $75,000. This real estate investor strategy allows the investor to buy and hold plus earn an immediate profit of $15,000 if they refinanced (minus closing costs). This allows the investor to have similar immediate return as a flipper yet they still own the property with all the benefits of the cash flow and equity growth. This works on small transactions as low as this seventy five thousand dollar deal to as high as multi-million dollar commercial apartment buildings. Quite often with commercial lenders the seasoning time may be two years cor cash out refinance transactions.

No Seasoning Cash Out Blanket Loan

Finally and most importantly, there is the ability to use both of these strategies simultaneously. This offers the businessmen to access cash in their real estate portfolio they they would not have access to with any conventional funding programs.

These are just two financial options that can help the small business real estate investor succeed when they choose to own to rent or buy and hold their properties for long term cash flow and equity building.

 

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