Many times, when Borrowers apply for a real estate loan from one of the “Big Banks”, and later get turned down, they often think there’s no other options available for them to obtain real estate financing.
The Big Banks, which are also known as “A” Paper Lenders or even FNMA/FHLMC Lenders have a “One Size Fits All” Underwriting Approval Standard.
Those that aren’t aware, FNMA is the (Federal National Mortgage Association) and FHLMC is the (Federal Home Loan Mortgage Corporation).
Both FNMA and FHLMC are “Quasi Governmental Agencies” that operate in the “Secondary Mortgage Market”, where they stand ready to Purchase loans originated by the Big Banks or other “A” Paper Loan Origination organizations.
Most real estate loans can be compared to a “Tree Legged Stool”, the “3” legs of a real estate loan are:
3. Property Condition
If only “1” of the above “3” Qualifying Requirements don’t comply with the Underwriting Standards from one of the Big Banks, then the Borrower’s Loan Application will be turned down.
The Big Banks are very strict on each of the above “3” Qualifying requirements.
So just to restate, when Borrowers apply for real estate financing at one of the Big Banks and they just don’t quite “Fit in the Box”, then their Loan Applications are denied.
Many potential Borrowers are not aware that there are many alternative loans available in the marketplace for those that just don’t quite “Fit in the Box”.
These type of loans are known as Sub-Prime Loans.
Sub-Prime loans have interest rates that are a little higher than “A” Paper Loans, but not much more.
The main advantage to Borrowers when applying for real estate financing is that Sub-Prime Loans are much more “Lenient” on both Credit and Income Qualification Standards.
So, for Borrowers who have FICO Credit Scores that the Big Banks just won’t accept, then a Sub-Prime Loan is the next best choice.
Additionally, the Income Qualifying Standards are again much more “Lenient” and there are several “Other” ways to Document/Prove the necessary income to Qualify for the requested loan.
For Borrowers who own property or wish to purchase a property that has Deferred Maintenance or is not in at least in “Average Condition”, then unfortunately a Sub-Prime Loan is Not a choice, since Sub-Prime Lenders are just about as difficult as “A” Paper Lenders when it come to property condition.
In such situations, Borrowers would need to apply for a Private Equity/Hard Money Loan.
Some of the situations that Subprime Loans allow:
• Borrowers with Low Income
• Borrowers with Credit Scores below 600
• Borrowers with a Poor Credit History
• Borrowers with Prior foreclosures
• Borrowers with a New Businesses or Self Employed
The Income Qualifying alternatives that Sub-Prime Loan allow are:
Bank statement Programs…………this requires the Borrowers to provide 12 to 24 months bank statement where all Deposits are added up and then divided by either 12 or 24 to determine a “Monthly Average”, which is then used as the Borrower’s “Qualifying Income”.
Stated Income Programs………under certain circumstances Borrowers are allowed to simply State their income, versus having to provide “2” year’s Federal Income Tax Returns which the Big Bank require. This situation is ONLY available for Non-Owner-Occupied Properties……………otherwise known as rental properties. Subprime Real Estate Loans
Sub-Prime Loans do require a larger Down Payment than the Big Banks when applying for purchase financing, so Borrowers that apply for a Sub-Prime Loan should anticipate being required to put down at least 10% to 20% of the purchase price.
A few other benefits that Sub-Prime Loans provide:
• Longer Term Options – Up to 30 Years
• Lower Rates than Private Equity/Hard Money Loans
• Alternative Income Qualification Options
• Loan to Foreign Nations
Our company arranges and funds Sub-Prime Loans.
We would be happy to discuss the Specifics with those that have been turned down by one of the Big Banks to determine if a Sub-Prime Loan would be a good real estate financing option.
Additionally, for Borrowers inquiring to obtain a Private Equity/Hard Money Loan, we would also be happy to determine if a Sub-Prime Loan might be a better real estate financing option.
If anyone would like additional information or assistance, then please contact our company by phone at (888) 797-7970 or us E-Mail at email@example.com and we’ll be happy to assist in any way.