Selecting Non-Conforming Lenders for Your Project
2004-08-25
Non-conforming loans are loans that do not meet traditional bank lending criteria. Approximately 70% of real estate loans are non-conforming loans either because the financial status of the borrower or the nature of the property does not meet standards set by the bank.
When mortgaging your private residence or commercial real estate property, select a non-conforming lender in the same way you would select any mortgage company – by the numbers and the customer service. In general, you will find non-conforming lenders charge more than banks. However, their flexibility in loan criteria makes non-conforming loans much more attainable than traditional bank loans for many people in many different circumstances.
Commercial Non-Conforming Loans Generally known as hard money loans, commercial non-conforming loans comprise a substantial ‘piece of the pie’ of commercial loans. From purchases to re-sales, rehabs to refinancing, non-conforming lenders fund projects as diverse as gas stations, airports, RV campgrounds, timeshare complexes, apartment buildings, medical centers and more. Non-conforming loans are often used as bridge loans, making purchases of property possible in very short timeframes. Later, “take-out loans” or long term financing can be arranged and the bridge loan paid off.
One of the major difficulties in locating non-conforming lenders or hard money lenders is the plethora of advertising by non-conforming loan brokers. Almost all companies claiming to non-conforming loans are actually brokers who field loan requests and refer them to the lenders. Lists of non-conforming lenders are treasured possessions and referrals to the real money sources are rarely shared. Avatar Financial Group is a direct commercial non-conforming lender located in Washington State. A rare breed, even among non-conforming lenders, Avatar Financial Group is institutionally funded.
Working with an institutionally funded direct non-conforming lender will bring you the lowest rate possible on your loan and the fastest closing times. Many non-conforming loans are funded by investors. The investors are provided with a prospectus and they determine, along with their broker, whether they wish to invest in your particular deal. Once sufficient funds have been raised to cover the loan, the non-conforming loan is generated, with your real estate used as collateral. As a rule of thumb, expect to be able to get up to 65% of the current selling price of your real estate property using a non-conforming loan. A few non-conforming lenders do fund more than 65%, but the rates and points (upfront fees) go up dramatically along with the risks assumed for your loan.
In order to enjoy the best rates in non-conforming commercial loans, come prepared with business and personal financial statements. Non-conforming loans are not based as heavily on your credit scores and the like, but they are based on the reasonability of your loan request, the current resale value of your property and your gross/net income which will demonstrate your ability to repay the loan in a timely manner, as well as an exit strategy.
Residential Non-Conforming Loans
Residential real estate is governed by different and generally more stringent rules that commercial non-conforming loans. In order to protect the public against usurious rates, regulators in various states provide limits on non-conforming loans. If you are seeking a non-conforming residential real estate mortgage loan, expect to pay more than a traditional bank rate, but if you feel that the rate being quoted may be out of line, check with your state’s regulations to be sure you are dealing with a reputable broker or lender. In general, you will get a better rate if you locate the source of the money – the direct non-conforming lender, rather than working with a broker. The benefits of working with a broker include his/her ability to know which lender is most likely to offer you a loan you can afford and which non-conforming lender will be most likely to accept your loan package. In general, non-conforming loan brokers will also help you fill out the forms, which can be as daunting as traditional bank documents or as simply as 1-2 pages of basic information. What information will be needed will be dictated by the non-conforming lender. Once again, you will find a general pattern of higher rates for less financial data, more financial data required to enjoy lower rates. Come prepared with as much documentation as you can about the value of your property and your ability to repay the loan in order to get the best offer.
When mortgaging your private residence or commercial real estate property, select a non-conforming lender in the same way you would select any mortgage company – by the numbers and the customer service. In general, you will find non-conforming lenders charge more than banks. However, their flexibility in loan criteria makes non-conforming loans much more attainable than traditional bank loans for many people in many different circumstances.
Commercial Non-Conforming Loans Generally known as hard money loans, commercial non-conforming loans comprise a substantial ‘piece of the pie’ of commercial loans. From purchases to re-sales, rehabs to refinancing, non-conforming lenders fund projects as diverse as gas stations, airports, RV campgrounds, timeshare complexes, apartment buildings, medical centers and more. Non-conforming loans are often used as bridge loans, making purchases of property possible in very short timeframes. Later, “take-out loans” or long term financing can be arranged and the bridge loan paid off.
One of the major difficulties in locating non-conforming lenders or hard money lenders is the plethora of advertising by non-conforming loan brokers. Almost all companies claiming to non-conforming loans are actually brokers who field loan requests and refer them to the lenders. Lists of non-conforming lenders are treasured possessions and referrals to the real money sources are rarely shared. Avatar Financial Group is a direct commercial non-conforming lender located in Washington State. A rare breed, even among non-conforming lenders, Avatar Financial Group is institutionally funded.
Working with an institutionally funded direct non-conforming lender will bring you the lowest rate possible on your loan and the fastest closing times. Many non-conforming loans are funded by investors. The investors are provided with a prospectus and they determine, along with their broker, whether they wish to invest in your particular deal. Once sufficient funds have been raised to cover the loan, the non-conforming loan is generated, with your real estate used as collateral. As a rule of thumb, expect to be able to get up to 65% of the current selling price of your real estate property using a non-conforming loan. A few non-conforming lenders do fund more than 65%, but the rates and points (upfront fees) go up dramatically along with the risks assumed for your loan.
In order to enjoy the best rates in non-conforming commercial loans, come prepared with business and personal financial statements. Non-conforming loans are not based as heavily on your credit scores and the like, but they are based on the reasonability of your loan request, the current resale value of your property and your gross/net income which will demonstrate your ability to repay the loan in a timely manner, as well as an exit strategy.
Residential Non-Conforming Loans
Residential real estate is governed by different and generally more stringent rules that commercial non-conforming loans. In order to protect the public against usurious rates, regulators in various states provide limits on non-conforming loans. If you are seeking a non-conforming residential real estate mortgage loan, expect to pay more than a traditional bank rate, but if you feel that the rate being quoted may be out of line, check with your state’s regulations to be sure you are dealing with a reputable broker or lender. In general, you will get a better rate if you locate the source of the money – the direct non-conforming lender, rather than working with a broker. The benefits of working with a broker include his/her ability to know which lender is most likely to offer you a loan you can afford and which non-conforming lender will be most likely to accept your loan package. In general, non-conforming loan brokers will also help you fill out the forms, which can be as daunting as traditional bank documents or as simply as 1-2 pages of basic information. What information will be needed will be dictated by the non-conforming lender. Once again, you will find a general pattern of higher rates for less financial data, more financial data required to enjoy lower rates. Come prepared with as much documentation as you can about the value of your property and your ability to repay the loan in order to get the best offer.
