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 debttoincome 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 lenders such as 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.
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