The real estate industry had been very accommodating in the earlier times. Any new investor who knew nothing much about the field could easily find their way through with minimum effort. Mortgage lending was readily available in banks and even more accessible with hard money lenders. Since 2008 however, things have taken a downturn.
What happened in 2008?
The financial crisis of 2008 is still fresh in the minds of most people. To the lenders and insurers, it was a period of loss and hefty spending. Many people who had borrowed to invest in housing were in one way or another depending on income from their employment to service the loans. It was therefore unfortunate that a substantial number lost their jobs and so could not have anywhere else to raise money.
Moreover, the demand for houses reduced and so majority of investors who planned to raise money through resale could not meet their goals. After this, many short term lenders tightened the grip on their money by instituting additional criteria in order to minimize chances of falling in the same situation again.
Changes in bank borrowing
Though many banks still offer overdraft facilities, they have reduced some of the freedoms that clients used to enjoy in the past. One of these is the big slash on the amount one can borrow. The institutions also charge higher interests and facilitation fees on mortgage lending facilities. In addition, not every account holder has access to overdraft these days. This is made worse by the fact that regulatory authorities have made lending conditions stiffer for the banking sector.
Changes in hard money lending
Hard money lenders Houston are freer with their finances as compared to banks because unlike the former, their money is privately resourced. Even then, these individuals or companies have not delayed to tighten their lending requirements for two reasons:
First, the demand for their services has risen over the recent years, and so they have they have become picky when it comes to the consumers they are willing to serve. Secondly, they are in business and so wish to protect their resources from scrupulous borrowers or people who are likely to cause them trouble in future.
Two of the new requirements in houston lending commercial property that a common hard money lender will require from a borrower include the following:
1. Credit history
Many lenders have now picked the habits of banks of denying people advances if they have spotty or non impressive credit histories. A few might award you a loan but will set their interest rates based on this. This means that borrower “A” and “B” can get the same loan amounts but end up paying different interests at the end of the same loan term.
Some firms will not give loans to first time borrowers because they are deemed not to have experience and so are unreliable. There are very few mortgage lending companies that do not take these two conditions into account while determining your credit worthiness. Find one online.