Finding The Right Lender For Your Smaller Loans

By Than Merrill

Where can real estate investors and home buyers find financing for small mortgage amounts?

Most don’t anticipate a smaller loan amount to be a much bigger issue when it comes to financing a property, but it often is. Many have been caught off guard after signing a contract or paying cash for a property with the intent of refinancing. This can also make it really difficult for sellers and real estate agents to move property.

Banks and other mortgage lenders love big loans. Big loans can mean big commissions for mortgage loan officers. After all, would you rather spend the same amount of time and energy to make 3% on a $1M million dollar loan or a $10k loan? This also impacts efficiency and profitability for lenders. Many simply won’t touch small balance loans, even if they can make them. They just don’t want the hassle. This can often apply to anything under $100k. Some lenders have lower minimum loan amounts around $75k, or a little lower, but rarely will they enjoy doing them. That can be a real pain as a home buyer or real estate investor when you are finding a ton of juicy looking deals under $100k. If that $7,000 property is more hassle and ties up more cash than a $170,000 property, most just skip to the higher end stuff. Still, there are lots of cheap house deals out there. So how do you finance them? Or how do you help clients finance them?

Credit Cards & Online Banking

In some cases, houses can just be put on a credit card, a prepaid card, or short term advance from an online banking or payment provider. PayPal and Amex might be two to check out. The interest may not be cheap, or you may not have long to pay it back, but you may be able to act fast, and avoid other typical mortgage borrowing costs. If you just need a little cash for a flipping houses fast, it might be worth exploring these as an option.

Owner Financing

Owner financing should be a pretty obvious option. If you are looking for an inexpensive property, try looking for sellers that will finance. If you are selling on the low end, consider maximizing your return, and the speed of sale by offering financing.

Personal Loans

Secured and unsecured personal loans may also be a less stressful and less time consuming choice. What you get may depend on how much you have on deposit, your credit score, and current eagerness of lenders to put money to work, as well as relationships, but you may be surprised at what you get. Fixed loans and personal lines of credit may be an option, and they may come with low costs.

Commercial Real Estate Lenders

The lines between types of lenders has really blurred, as new regulations have pushed more lenders to focus on business lending. However, that doesn’t mean they won’t lend on residential homes. Some offer blanket mortgages or lines of credit and short term loans to investors. This may help finance a whole portfolio of less expensive properties and repairs.

Private Money Lenders

Private lenders may be happier to make smaller mortgage loans. They don’t have the overhead and labor costs big companies do. They may even prefer starting out with small amounts while they build trust and a relationship with you. You may run into some at local real estate investment groups. Others may be organized as local hard money lenders. Then there are crowdfunding and peer to peer lending websites that can help both real estate investors and individual homebuyers finance a home from a variety of private individuals.

Credit Unions & Local Banks

If you haven’t tried them yet, and you have reasonable credit check out local banks or credit unions. They can be a lot more flexible in what they can loan, and are always looking to draw new deposit accounts and customers.

Summary

Obtaining small balance mortgage loans can be a lot harder than most anticipate, but there are a lot of options to explore. Cheap real estate isn’t always a deal, but it is often undervalued and overlooked due to the financing challenge. Those that can find good finance partners in this arena can find great profit margins, and also buy houses for a lot less than others. Will you give it a shot? Have you stumbled on a lender that loves making small balance mortgage loans?

Why Everyone Needs to Buy a Home in 2015

Posted by JD Esajian

Everyone needs to buy a home in 2015. Those that already have homes need to consider moving up, or even finding second homes and investment properties. So why is buying a home so important this year? How can buyers overcome the perceived challenges?

Rentals Are Taking Over

Rentals are taking over America. More land and existing homes are turning into rentals. Home builders, large funds, and private real estate investors are converting into rentals. As a result, homeownership in the U.S. is dropping to new lows. Saturation of rentals creates a competitive environment. However, demand for rentals remains so high that rents and application requirements keep going up. While many are turning to rent as the ‘more affordable option,’ it is becoming tougher than buying. It is twice as expensive to rent as buy a home in many parts of America. Landlord screening procedures and move-in costs are now even tougher than some mortgage lender criteria.

Fortunately, there are fewer options for renters. The options that are available are more expensive and tasking than they used to be, however.

None of this is a secret. Yet, for many, buying a home still appears to have its challenges. Many still suffer with bad credit. Others expect the down payment requirements to buy a home to be too burdensome. Millennials are one of the biggest pools of prospective home buyers, but many have not yet established their credit. Many do not feel they are ready to settle down yet. Still, everyone needs to buy a home in 2015. Let’s take a look at the reasons:

The Benefits Of Homeownership

There are many benefits of homeownership. Even if you think you are not ready to settle down, or may lack the credit and finances to buy a home this year, it is worth remembering the following:

1. Lower living expenses
2. Tax breaks
3. Ability to create your own environment
4. Owning a tangible asset
5. Building wealth and a nest egg
6. Enhanced school performance for kids
7. Eliminating housing costs in retirement
8. Avoiding getting priced out of your home town by landlords
9. Growing an inheritance for the next generation
10. Acquiring passive income producing assets

Why Buy A Home Now?

Renting is unsustainable. It is as simple as that. There are many potential excuses not to buy a home. Many landlords and corporations would love for you to believe them. Your rent pays for their investments, expensive cars and clothes, and larger homes. We all may have to rent sometimes. But, if you stay a renter you and your family will always be captive. You’ll always be ransom to what landlords ask for. Who knows how much rent will be in 5 years? Or where you will be able to afford to live? Chances are it will be somewhere far smaller, for more money. Perhaps even in an inferior location.

At the same time; buying a home has rarely been as affordable as it is today. Interest rates remain low. Home prices are lower than they will be for many years. Buying a home now offers an incredible bargain. For many, it will make all the difference in surviving and thriving later in life. Waiting will only mean paying more for living, and paying lots more for the same home later.

Overcoming Home Buying Challenges

It’s obvious that buying a home is smart. Buying more than one home can be even better. This is the time to buy, but what if your credit isn’t perfect? What if your credit is terrible? What if you are self-employed? What if you don’t have much of a down payment?

Buying a home this year can still be easier than you think. If credit is the challenge, you can fix it. You can have negative items removed by challenging them yourself. You can use an attorney or credit repair specialist to assist you. There is an estimated 2,000 or more down payment programs in America. These programs can help provide the down payment you need. There are even programs to help with closing costs and home improvements. This is on top of the return of 100% financing, and stated income loan programs. Self-employed borrowers can take advantage of alternative mortgage lending to qualify for home loans.

There are still options for those unable to fix their credit or qualify for home loans in 2015. Rent-to-own, seller financing, and lease options can all work.

The key is not getting discouraged. Get out there and find a way to buy a home.

5 Steps To Successfully Buying Bank Owned Property

How do you buy bank owned foreclosure property?

How hard is it to buy bank owned homes? Why is it so attractive? What challenges have made it difficult for home buyers and real estate investors to purchase these properties in the past?

Buying a Bank Owned Property in 5 Easy Steps:

1. Find lenders with REO properties
2. Identify those which can, and are selling foreclosure homes
3. Get in touch with the right contact
4. Negotiate a great deal
5. Close the deal and get your keys

Sounds easy, right? Unfortunately, while it sounds simple, it has still proven challenging for many buyers. So what struggles do real estate investors and home buyers face in this process? What are the solutions?

What is ‘Bank Owned Property’?

‘Bank owned property’ normally refers to residential homes and commercial real estate that a mortgage lender has repossessed. This frequently happens when a home or business property falls into foreclosure. When a borrower falls behind on mortgage payments, the property enters the foreclosure process. If not fixed in time, the property will be sent to foreclosure auction. If it is not sold at auction, the property becomes real estate owned (REO) by the lender. There are actually many other reasons that a home can fall into foreclosure. It isn’t just due to missed monthly mortgage payments. This can include:

• Delinquent property taxes
• Balloon mortgage balances that can’t be paid
• HOA and condo dues and special assessments
• Forced placed insurance fraud
• Lender mistakes

While foreclosure auctions have generally become very busy, not all properties sell. In fact, quite a few do not. This can be due to auction rigging fraud, because the amount demanded is too high, or the property appears undesirable to those bidding. This has resulted in U.S. banks and credit unions being lumbered with tens of billions of dollars in REOs.

Why Buy Bank Owned Properties?

Bank owned homes have been in high demand with buyers. These foreclosure homes offer the promise of being great deals. However, that is not always the case.

The perception is that banks desperately need to get rid of these non-performing assets. In turn, they’ll sell them for pennies on the dollar to get rid of them fast. This has often been the case. But it isn’t always the rule. Despite how much lenders might like to sell distressed homes fast, and even be willing to do it cheap, there are challenges. These issues can include:

• Title and legal issues which can prevent the sale
• Accounting rules and a need to make the numbers
• Logistical and staffing challenges
• Greed
• Unrealistic price and value opinions
• Difficult selling process

Banks, credit unions, and government do sell off these properties. They often do it in a big way. Many buyers have found amazing discounts on bank REOs. But assuming you can walk in to your local bank branch and negotiate from a position of power isn’t always realistic. Rarely will they beg to sell you homes, even if it looks like they need to. Done well, buying bank owned homes can be incredibly profitable. Regular home buyers may find they can score a great deal on the home of their dreams. Real estate investors may be able to use this as a channel for buying distressed properties in bulk on a regular basis.

The Struggles of Buying Bank Owned Homes

Thousands of real estate investors and homebuyers have tried to buy bank owned homes. Thousands have given up. If it was super easy, there wouldn’t be any left. This doesn’t mean it isn’t profitable, but it does require understanding the struggles and solutions. Issues facing bank owned home buyers include:

• Difficulty on performing due diligence upfront
• Challenges in obtaining REO lists in bulk
• Property condition
• Difficult and lengthy negotiation processes
• Difficulty in ‘qualifying’ as a desirable buyer to bank property sellers

Property condition can be tricky. Properties selling at $10,000 or $20,000 may appear to be a ‘no-brainer.’ However, if it needs to be torn down at a great cost, it may be less of a deal than it appears on the surface.

There are many foreclosure and REO properties listed by banks, and available through the MLS. There can be deals in this pool. But the most appealing discounts are normally found by going directly to banks to find off-market deals they aren’t advertising yet. This cuts out the competition. The key to success here is making the right bank contacts, and presenting a strong case for your offer to be accepted.

Summary

Bank owned properties can be very appealing. The mechanics of buying them isn’t too different from buying other homes. But there can be extra work and time involved in finding good off-market bank owned homes. Many might choose to skip this minefield and buy remodeled homes from other investors, or wholesalers that source these properties on their behalf.

The Biggest Challenges For Homebuyers This Year

What are the biggest challenges for homebuyers this year, and how can they be navigated?

For those that have purchased homes, or made the move up recently, this promises to be one of the most attractive years to do so. Of course, this doesn’t mean that there won’t be challenges and obstacles. So what factors could hold many buyers back from buying a home?

Down Payments

While homes in many parts of the country are still trading at very attractive prices, down payment requirements are still higher than they used to be. While Millennials are bringing a major wave of potential home buyers to the market, and many members of Generation X are looking to get back in to homeownership, many won’t have substantial savings to leverage as down payments. Making traction by trying to save is becoming even more difficult as rents and home prices rise simultaneously. Fortunately, those willing to look will find a variety of low and no down payment home loan options, as well as down payment assistance programs. Buyers can’t always expect home sellers or Realtors to be aware of these programs, but they are out there.

Financing

New and more aggressive mortgage loan programs are coming into the market. Some offer lower down payments and even 100% financing, others offer easier qualifying. However, the overwhelming sentiment still appears that mortgage underwriting is still too tight and difficult, even for very affluent executives with great jobs and incomes. This can make it a little frustrating to buy a home. However, those that wait until underwriting is relaxed even further will have to deal with higher interest rates and house prices. There are great home loan deals available, but it can take a little extra mortgage shopping to find them, and a lender that is serious about getting applications funded. But it is well worth the time invested.

Selling Old Homes

This is a superb time to move up to larger homes, and for some even to downsize. However, while the U.S. housing market is noticeably in better shape and heading in the right direction, not all homeowners will find it a breeze to sell their current homes for top dollar. It will take a smart approach to marketing, good pricing strategy, and will depend on the local market and what type of competition there is. Are foreclosures still rife and creating a drag on values, or is there a ton of new construction which may look more attractive? What’s your plan B to sell fast and get cash?

Responses from Real Estate Agents

Ironically, one of the biggest hurdles for many would-be homebuyers this year is simply going to be getting responses from Realtors advertising properties. Why exactly so many spend such great amounts of money and time on advertising only to not bother answering phones and emails is still a mystery, but it remains one of the painful realities of the industry for homebuyers. Just expect to make a few calls and inquiries before finding a source of properties. There are good Realtors and investors out there that provide great service, you just have to hunt them down. Just don’t let them go once you’ve landed one.

Making Sense of the Market

Some will continue to allow their lack of certainty about the real estate market, or the contradictions they experience between perception and reality to cause them to drag their feet and miss out on this great opportunity. Home buyers need to recognize the advantages of buying a home right now, and recognize how to separate this common sense approach from being blown by the whims of media hype. While there are many great house deals to be found when looking at the larger picture some will also have to get over the idea of scoring ‘steals’ on foreclosures and short sales and still getting their vision of a dream home in one package. These properties are still out there, but represent a smaller portion of the market than they used to.

Dealing with Competition

As the American housing market continues to improve, the level of competition over homes for sale will grow too. This doesn’t mean that competition is a bad thing. Sometimes it just means buyers need to move faster when they find a decent deal, though sometimes bidding wars can get overblown. Buyers need to remain objective and know when to walk away or not.

Helping Distressed Sellers & Buyers

How can real estate investors help more distressed buyers and sellers in 2015?

While more traditional housing sales are fueled by rising property prices and new construction, there are still a substantial number of distressed properties in the United States. So how can real estate investors assist more of these property owners, while aiding the growing pool of distressed buyers too?

Finding the Sellers

Between REOs, auction properties, pre-foreclosures, and those just struggling to keep up housing payments, there are still billions of dollars in distressed homes and commercial properties in America. Some real estate investors might feel like it has been harder to connect with the owners of these properties due to competition and how fast the foreclosure process has been speeding up. It’s really a matter of identifying who is holding this inventory, and finding the best ways to connect with them. Some solutions include:

• Connecting with bank managers
• Reviewing public records
• Buying lists
• Driving neighborhoods to scout neglected properties
• Direct mail
• Networking with local real estate agents
• Providing assistance to corporate HR departments for relocation
• Interacting on online forums
• Email
• Social media

Getting Purchase Offers Accepted

Of course, many real estate investors have found that the biggest challenge isn’t just finding distressed properties and motivated sellers, but connecting with them, and getting them to accept offers. It’s not just about price. Sellers are incredibly fearful today. Many have tried reaching out for help before and have been shut down, or have had transactions fall through. They have been programmed to be paranoid by the media, and many have lost all faith in finding real help.

There is a lot that real estate investors and other industry pros can do to change this mindset. Yes, everyone should be cautious about being sucked into real estate and mortgage fraud and scams, but paranoia is preventing many from obtaining critical and valuable help. Blogging, writing articles, speaking in the news and more can go a long ways towards fixing things.

Even if property owners have seen their hopes of selling crushed in the past, it doesn’t mean that they can’t be helped. Savvy real estate investors can negotiate down and get liens released. Even those that are underwater on mortgages or have little home equity can be assisted in more creative ways. Lease options, subject-to structures, wrap-around mortgages, owner financing, and more can help reduce tax liability, while providing a fast and graceful exit to the seller, and making deals viable for investors.

It’s also difficult for sellers to know who to trust today, and in many cases they fear being taken advantage of. Instead of complaining about these “crazy” owners that won’t listen to reason, real estate investors should work on overcoming these objections by making sellers more confident in the process and their potential buyers. Show your strengths; whether that is great credit, plenty of cash, the ability to close quickly, or a great track record of helping others in similar situations. This can be done online in advanced via real estate websites, blogs, and social media, and cultivating testimonials.

Helping Today’s ‘Distressed Buyers’

While this may be new terminology for some, it really isn’t a new situation. As the U.S. housing market improves, more and more individuals are feeling the pressure to buy real estate. New grads are moving out on their own, Millennials are having families, parents are feeling the pressure to grow a nest egg, and no one wants to be left in the dust as their friends, coworkers, and family members reap all the rewards of property ownership. Those that don’t buy now face rising rents and housing expenses, while those that do are locking into ridiculously low rates and tiny house payments.

Still, despite the need and desire to buy and invest in real estate. these buyers are feeling distressed due to a variety of factors:

• Poor credit
• Lack of credit history
• Lack of down payment
• Difficulty saving due to high rents
• Nonexistent responses from real estate agents and sellers

Real estate investors can do a lot to help these individuals and bridge the gap. They can educate and turn individuals onto needed resources. They can respond, and do it quickly, and they can pair these buyers with the distressed inventory to create many win-win-win scenarios.