It would be an understatement to say that the decline in the real estate market changed the lending environment. Lenders who used to allow stated income loans no longer offer them, or they may claim to offer them but decline 99% of the stated loan submissions offered. This is extremely bad for investors who have made their incomes solely from real estate investing, or other self employed endeavors.
Primarily because when they do their taxes they have a lot of items to deduct from their income, and so their tax returns do not effect the true gross income that they earn. W2 employees do not have this problem, as they are qualified based on their full gross income and even if they do write off their incomes, the tax returns are hardly ever requested when W2's are provided.
A good Residential Hard Money Lender, understands this is the case for full time real estate investors, and they will not have much taxable income on purpose at the end of the tax year. Even if tax returns are requested, its just to verify that the investor really does what he said on the application provided, and not to calculate debt to income ratios.
Another benefit to obtaining a Residential Hard Money Loan is that the loan is based on the After Repair Value, and not the Purchase Price. With a conventional lender, it doesn't matter if you are buying at 10% of value; they would still require a certain percentage down payment on that purchase price. In other words, conventional lending methods ignore the fact that you are getting the property at a deep discount.
When you obtain a mortgage with a Residential Hard Money Lender you can rest assured that the After Repair Value (ARV) is being considered in the transaction. In a lot of cases the deep discount an investor is getting will allow room for the lender to roll in closing costs, rehab costs, etc... This decreases the amount of capital that an investor has to put into their projects, and therefore leaves more capital available so that he can do more deals.
If you have a real estate investment in mind, and are concerned with minimizing risk, and maximizing return on investment, you should consider utilizing a Residential Hard Money Lender. Its easier to qualify, and they are more flexible on the structure of a transaction.
Are you an investor looking to minimize risk, and maximize ROI by partnering with an aggressive Residential Hard Money Lender? Does including closing costs, rehab costs, and basing your loan on After Repair Value sound appealing?
