New Developments in Mortgage Lending that Pushes out New Investors

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.

2. Experience
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.

When Hard Money Lenders Houston are the Best Option for Quick Financing

Financing the construction of your new home or residential property can be a tough affair if you intend to use only what’s in the pockets. Many people therefore opt to go for loans from banks; but these too have ordeals of their own that one has to go through before securing them. Some people may not succeed at all. Hard money lenders Houston provides a smoother path for anybody who wishes to avoid such difficulties.

Minimal Bureaucracy

A lot of conditions and paperwork are involved in the process of securing bank loans.  These lenders on the other hand only require minimal documentation before releasing funds. While the law requires lenders in this industry to confirm the ability of their prospective clients to repay, the lenders themselves, to a large extent, are left to define what exactly determines one’s ability to loan repay.

Many of them for instance do not place high emphasis on your income statement. Instead, they are more interested in the value of your asset, which you will place as the collateral. Because they don’t place much concern on credit rating, this also gives a chance for people with spotty credits histories to find financing.

Timeliness

The process of constructing or conducting repair on property is not devoid of unexpected crises. Some of these, when they occur, require immediate redress, lest the investor incur further, heavier losses. Applying for normal loans may not help in such circumstances due to their delays.

Banks are required by many jurisdictions to issue normal loans not earlier than 30 days after application. With hard money lenders Houston however, you can have the cash in a matter of days. It is this timeliness that makes them even more desirable.

Flexibility

Unlike overdrafts and other kinds of short term loaners, these lenders give better flexibility with their products. Among these are the minimal restrictions over the amounts you can borrow; here the value of what you place as the collateral is what determines the limit of the amount you can get. Many firms will give you up to 70 percent of this value.

Moreover, if you cannot repay the amount in time, you can opt for refinancing since this kind of lending does not block such avenues for borrowers. Alternatively, you may choose to extend the loan term or flip off the property.

Most of these lenders are property investors themselves and so they understand the tough circumstances that other people venturing in real estate may experience. Apart from offering you advice on how to tread cautiously, some may also give other softer provisions for borrowers who experience hard time with repayments.

It is always good to do wide research before settling for your preferred source of financing. While major hard money lenders Houston will give you superior deals compared to banking institutions, even among them there are different terms and conditions, some of which are better than the others. Take your time to sample as many of these as possible before you make a pick.

How to Benefit from Hard Money Houston Lenders

It is important to have a place where you can get easy access to funds in case you need them quickly. At times, your own savings may not be enough especially for bigger needs. Since banks are also not too elastic with their overdraft provisions, hard money Houston may be the appropriate alternative. However, not all people who go for these loans benefit- at least as much as they should. This is because many borrowers tend to overlook certain things, which cause immediate or future negative impacts. Here are the things to remember:

Avoid last minute rush

Crises usually come with confusion that may cloud your judgment when choosing a lender. Some rogue firms may also take advantage of your hurry to enforce on you certain conditions which will benefit them while hurting your pockets. Therefore, instead of waiting for crisis to strike before searching for a lender, you can equip yourself with advance information concerning the best options in market by ellis equity | houston hard money lenders . In this way you will know exactly whom to head to when eventualities happen.

Compare different terms

Carry out comparisons on interest rates, point charges and conditions that different firms require their clients to meet. Many firms charge somewhere between 18 and 20 percent but with a thorough look you may find one that takes as low as 12 percent. The client is also supposed to cater for the loan facilitation fees which may range between 3 and 10 percent of the loan amount. Apart from these, remember to also check on the repayment period. Longer periods will provide you with ample time to settle the amount.

Plan for the money

Just because this is a short term lending does not mean you should hurry through in spending the money without having a concrete plan.  Before you even get the money, ask yourself how you are going to raise it and make timely repayments.  You might have the best intention but without looking at such a simple area, time may run out before you achieve anything worthwhile and you might even end up losing it all.

Moreover, before or after you get the money, communicate with the different stakeholders and contractors and inform them the urgency of the matter. You should only put short term funds on the most urgent areas and on things that will produce quick results.

Have additional funds in place

Do not expect hard money lenders houston to finance the entire project. Most of them will only bear between 60 and 70 percent of the entire cost and leave the rest for you. You should therefore have another source of fund on the ready to complete your project. Some firms will need evidence of existence of additional funding before they release theirs.

Repay on time

You need to know that hard money Houston lenders are also in business. Therefore, they will naturally prefer clients that live up to their promise. To be in their good books therefore, ensure that you settle loans within the time limit. Next time, this will make your access to the facilities even easier.

Why Do Hard Money Lenders Houston Texas Take Down Payment From Some Clients and Not Others?

The issue of down payment is always stressful especially to investors who have not much in their pockets. Few hard money lenders Houston Texas offer facilities to clients without asking for a deposit. The prime reasons why getting advance money from the client is important include the following:

Insurance for risks

Some firms use this amount to cushion themselves against defaulter risks. Every lender is in for business, and therefore it is important that they reduce risks as much as possible. The amount might be paid to an insurance company or put into other investments.

Proxy requirements

In some jurisdictions, it is a requirement that firms acting as proxy lenders demand a certain percentage of deposit on every loan. This law however does not apply in many regions and firms will only take advance payment because of personal agreements with the lenders on whose behalf they act.

As a motivation

A few lenders believe that borrowers are likely to work harder when they pay deposit. Research has shown that there might be some truth in this. In the end the pressure benefits both the lender and borrower.

Hard Money Lenders Houston Texas

Credit history

Your credit history could also determine whether you get to pay a deposit or not. When lending to you directly from their resources, some of hard money lenders Houston Texas are less likely to ask for down payments from clients whose records are clean since they do not consider them a flight risk.

Even when they do levy these charges, the rate will be a bit lower than for clients with higher credit rating. If for instance, the maximum deposit is 30 percent for those with spotty records, people whose testimonials are clean might only be required to pay between 10 and 15 percent. This is part of the reasons why it is important to provide detailed information about your past especially if the details are impressive.

Don’t confuse deposit with financing gaps

Deposits are not the same as financing gaps. While not all lenders will ask for a deposit, each and every one of them want to be sure that you are committed towards the goals that you have set forth and that the said goals are achievable. To do this, they must confirm that you have enough money to cover up for the rest of the project after they have given their input. This should be about 30 or 40 percent of the total final property value.

Another situation where financing gaps may come in is when your valuation calculations do not match up to that of the company’s agents. The valuators usually use the information you provided in your own calculations together with their own observation to make their own assessments and recommendations, which the lender will work with.

If these are lower than what you calculated, the lender will only be willing to give you an advance based on their calculation, but will still expect you to raise the extra funds first so that the final value matches up to your previous sum.