There are conventional loans and hard money loans for owner occupied properties. Learn the upside and downside of owner occupied hard money loans.
You may have heard of “hard money” loans for construction purposes. Private hard money loans are actually used for multiple investment opportunities including consumer purpose/owner occupied hard money loans. If you intend to occupy the property you are seeking to purchase, then you need to look into consumer purpose and owner-occupied loans. The borrower intends to occupy/live in the property that they are seeking the loan for—In other words, your primary residence. These types of loans can be used for paying a tax lien, helping a family member, or bill consolidation, as long as the loan is tied to any form of real estate.
Since the financial crisis of 2008, the tighter lending regulations, closing time frames, documents and disclosures involved, and borrower protections has led to the whole process with private lenders being one that is overly onerous. A great Plan B could be private consumer loans. Properly underwritten and compliant are appropriate for borrowers who cannot qualify for Plan A (conventional loan).
If you are a real estate agent or mortgage professional, your clients may want to utilize this loan source if they do not qualify for a conventional loan and do not want to lose the purchase of a home.
Consumer Bridge Loans
The consumer bridge loan, short term in nature, is a good loan to consider when you’re in a time of near-term challenges or when conventional financing is not an option. Here are the many reasons for securing a bridge loan:
· If you have a home to sell AND looking to buy a home.
· If you are looking to downsize and do not want to “double move”.
· Bankruptcy, foreclosure, short sale or job time.
· Challenges when it comes to down payment.
· Personal situations such as divorce or probate situations.
· If you are seeking to avoid tax, and do not want to liquidate other assets (stocks, 401K, etc.…).
· 1031 exchange’s
· Fallout from a reverse mortgage
Terms are usually as follows: 5 to 7 days to close, requires a purchase component, a maximum term of 11 months, a typical interest rate of 9.9%, and 2-3% points plus doc and admin fees.
Long-term private consumer loans, although less common, can help individuals in certain situations.
One of these scenarios is a person with credit challenges that cannot be resolved in 12 months. Credit seasoning is a term to describe the time it takes a borrower’s credit to reach a level to qualify for a conventional loan. Another reason for this type of loan is that the borrower has not been in their current position for 24 months. The borrower may qualify for the long term 30/30 loan: A 30-year loan with fixed payments on 30-year amortization.
Additional reasons for a 30/30 loan include: self-employed, hard to document income, income history inconsistent, credit issues, bankruptcy, already own home and you need to refinance, and the purpose is consumer in nature. Terms may include the following: could close in as little as 5-7 days, no prepayment penalty, interest rate of 8.99%-9.99%, and 2-3 points plus doc & admin fees.
Word of caution: If the lender tells you that they can do a loan that does not fit into the above guidelines or seems “to good to be true,” check reviews and backgrounds before proceeding. You can be assured that when obtaining a loan with Level 4 Funding, you’re working with ethical, knowledgeable individuals that have been in the business for over 20 years. Call us for a no-obligation quote.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.