Why to Approach a FHA Lender for Hard Money Loan

Hard money loans are a requirement for those who are being bugged by extremely harsh financial crisis like bankruptcy and foreclosures. The lenders estimate the value of the material possessions of the applicants for this loan. On the basis of this estimation, the loan is granted to them. The same is the picture in Florida too. A FHA lender does not insist on having collateral for the loans associated with money. As these loans are devoid of collaterals, they are not to be availed at conventional financial institutions like banks. However, they are on offer from private lenders.

What drives people to go for loans from private lenders? They borrow these loans obviously because they cannot provide collaterals. This fact apart, the rate of interest with these loans does not experience volatility as bank loan interest rates do. It rather varies from one lender to the other lender. However, with individual FHA lenders, loan interest rates go from high to higher. Usually, the scale of interest rate varies from the level of 15% to that of 25%. Then, why do people borrow loans with relatively higher interest rates?

Evidently, because of the unavailability of other financing sources for them. When you are left with no way to gain finance except the way to the door of a FHA lender, the lender may take advantage of your financially unfavorable circumstances. He may charge you with as high interest rate as 25-29%. It will simply add to their financial trouble. Therefore, people intending to borrow hard money loans from private lenders must take care of this fact. Another serious fact to keep in mind is that irregular or delayed loan payment can lead the lender to impose an increased interest rate on the borrowers.

Should people borrow hard money loans? Ya, they do. Why not! If they are capable of paying it off on time. The amount of this loan to be granted is decided according to the value of the property or possession of the borrower. To put in simpler terms, a hard money loan can amount to 65%-70% of a property’s price. These loans are therefore also known as loan to value or LTV. The private lenders who provide these loans belong to the category of the first lien holders of a property. But if the worth of a property is less than a hard money loan given to the property owner, the FHA lender can collateralize the loan with another property owned by the borrower.

The collateralizing of a hard money loan with a piece of property is defined as blanket mortgage in a word. The borrowers are required to understand the various types of this loan. One of the types is contribution hard money loan. In this particular type, lenders do not grant the entire loan amount at a time but in stages. You will be given the loan amount in two or three parts. To get our of the confusion of borrowing a hard money loan from a FHA lender, seek out advice from a finance expert.

Financing Investment Properties – Good News For the Conventional Investors!

Fannie Mae is changing their rules regarding multiple mortgages to investors in order to help jump start the housing recovery. Their current policy of financing a maximum of four investment or second home properties has been changed to five to ten for properties purchased after March 1, 2009, whether or not Fannie Mae is the investor on the borrower’s other mortgages. The following are the new eligibility requirements:

Eligibility Requirements
· Limit of five to ten financed properties per borrower, with underwriting requirements including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and the type of property involved).
· Applicable to whole loan purchases or mortgaged backed securities.
· Lenders must use a special code 150 when they are delivering loans to investors or to borrowers for second home properties.

Reserves Requirements and Assignment of Rents

The following are the new Fannie Mae reserve requirements for loans on investment properties and second homes to borrowers with multiple financed properties:

One to four financed properties (including the subject
property):

· Two months of reserves on the subject property if it is a second home,
· Six months of reserves on the subject property if it is an investment property, and
· Two months of reserves on each other financed second home or investment property.

Five to ten financed properties (including the subject
property):

· Two months of reserves on the subject property if it is a second home,
· Six months of reserves on the subject property if it is an investment property, and
· Six months of reserves on each other financed second home or investment property.

Investment property borrowers must now execute a Multi-state 1-4 Family Rider Assignment of Rents Form 3170 authorizing the assignment of rental revenues to the lender. Fannie Mae is deleting the requirement for rent loss insurance though. For more information, visit Fannie Mae’s website.

Understanding How Investment Loans Differ from Typical Mortgage Loans

Investment loans differ from a typical mortgage loan on a primary residence. Since the money will be used for investment purposes, lenders usually require a larger down payment for one thing. The interest rate is usually higher as well. Investment loans are for shorter periods of time while the monthly payments are higher, but less money is paid in interest during the term of the loan.

Requirements for Conventional Investment Loans

Lenders require a title policy be purchased, an inspection be conducted and an appraisal be done on the property to make sure the property appraises. Every conventional lender will review the borrower’s current debt to income ratio, past credit history and ability to repay the loan.

Hard Money Lenders

Investor funding through hard money lenders is an alternative to obtaining traditional conventional financing for many investors these days. Hard money loans can be used for not only acquiring property but rehabbing and resale of single family homes. Hard money lenders look at the asset more than the borrower’s credit history and income so it is easier to get financing.

Hard money lenders are mostly other investors who have cash and are willing to loan to you as an investor. Finding them is not that difficult. The best way to find a hard money lender is to get a referral from another investor or friend or family member. In fact, you may already have a family member that is interested in loaning to you. There are many hard money lenders that advertise on the Internet as well.

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