How to Make Good Use of the Money Loaned?

Loans are types of debts that involve monetary exchanges. The creditor lends money to the debtor who in turn repays the same with interests. Loan itself has different types. The most common of which are the secured loans or loans with collateral or mortgage and another type of loan that does not involve any security which is also called unsecured or personal loans. A secured loan has lower interest rate since the creditor has certain security that the loaned amount will be repaid either by the same principal obligation or through the accessory obligation by foreclosing the said mortgaged property. The amount of loan granted to anyone who applies for a loan with collateral or mortgage depends on the value of the property used as a security or accessory obligation. Unsecured loans, however, have higher interest rates due to increased risks on the part of the creditor. The creditor would want that such risks be compensated and the principal be paid quickly hence this type of loan entails higher interest rate and a relatively shorter period of terms of payment. The amount of loan granted for an application for unsecured loan depends on the personal background of the applicant. This personal background pertains to the person’s credit history, capability to pay, monthly income, and current financial condition.

Whatever type of loan one obtains, it is very important the he or she makes good use of the loaned amount. If the person has several debts, the said loan can be used to consolidate these debts and maintain one principal debt to lower the interests he or she is paying every month from these various debts. A proper debt consolidation plan must be availed by such person to ensure that his or her debts are paid off strategically. If the person obtains a loan for the purpose of securing additional purchasing power and an emergency cash savings, it would be best that the person first consider another type of loan which is the home equity loan. A home equity loan offers a credit line where one can withdraw in a staggered basis the approved loan amount. In this case, only the withdrawn amount shall incur interest. Further, to ensure that these money are spent wisely, it is also highly recommended that the person obtaining such loan observe proper personal finance and seek other tips and strategies from financial advisers to ensure a sustainable financial stability.

Having mentioned all of these, it is but apparent that the money loaned really provides financial relief on the part of the debtor. However, such relief can be for a short or long term. The manner and purpose of spending the money loaned is crucial in ensuring that such loan will certainly benefit the person for long. Hence, it is advised that prior to obtaining a loan, one must first determine the objectives and main reason for applying for the same. Upon approval, he or she must maintain focus on these objectives so that the money will be used wisely to reap benefits both at present and in the future.

Hard Money Loans Can Mean The Difference Between Success And Failure For Real Estate Investors

Hard money loans are tools for investors, business owners, property owners, would-be property owners and others for whom conventional loans are unattractive or unavailable. Originally, the term was used to describe any loan that was secured by property or other collateral, as opposed to unsecured borrowing, such as cash advances from a credit card or bank line of credit. Today, although the meaning has not really changed, the way that the term is used has. It can all be confusing to the average person, so we hope to shed a little light on the subject.

At one time, it was relatively easy to get a hard money loan. The bank knew that if you could not make your payments, they could take possession of your property. The only real consideration was the value of your property.

Times have changed. Foreclosures take longer. Banks are often unable to recoup their losses. The large number of defaults in recent years has actually hurt some of the financial institutions. Believe it or not, the funds that commercial lenders have available are not endless. Some have had to reduce the number of loans that they make. In general, all lending institutions have adopted stricter qualifications for potential borrowers, in many cases, making it more difficult for individuals to get the money that they need.

Commercial banks are governed by the Federal Reserve and they must follow certain rules and regulations. In addition, each bank has its own policies. We commonly refer to the considerations, rules, regulations and bank policies as red tape. When we apply for a loan, the paperwork can be overwhelming and very difficult for the layman to understand. Read this, initial here, sign there, etc, etc. The red tape is meant to protect the consumer and the bank, but even when you understand that, it can be frustrating. Plus, the whole process takes a lot of time. You might wait weeks, only to hear that your request was denied.

This is where private lenders offering hard money loans may come in. In most of the United States, private transactions are not regulated by state or federal laws. There is less red tape, so you will get your answer faster. There is still no guarantee, but at least you will know that you should look elsewhere for financing in a shorter period of time. There will be less confusion and less frustration. Of course, the policies of individual lenders vary. Some check credit, references and employment. Others are more concerned about how quickly you can repay.

A hard money loan is generally a short term solution. It is most attractive to investors and others that need money quickly, in a matter of weeks, to close on a deal or take advantage of a potentially profitable opportunity. Long term financing may be available, but in the time it takes to find it, the opportunity may be lost.

There are several advantages to hard money loans from private lenders, as opposed to secured loans from conventional lenders (the banks), particularly for real estate investors. Suppose you have the opportunity to buy a property that “needs work”. The seller is particularly motivated because he is facing foreclosure or moving out of state, so he is willing to sell for far below the assessed value of the property, as long as you can close the deal quickly. If you go to the banks, it will take at least 30-45 days (probably more) to close. A private lender may be able to hand you a check in a much shorter period of time.

Time is very important to someone who wants to take advantage of the auction of a foreclosed property or a trustee’s sale. You may have the bidder’s fee, but the trustees typically want the full amount within 14 days. The banks do not work that fast.

For those who can wait for the money they need for a real estate investment, traditional loans might be the way to go. But for everyone else, hard money loans make a lot of sense.

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.