Alternative Loan Options for Residential Real Estate Investment

Conventional loans are typically the hardest to obtain for real estate investors. Some lenders don’t allow income from investment properties to be counted toward total income, which can make global underwriting a problem for certain investors, especially those who already have several existing conventional, conforming real estate loans reporting on their credit. In these cases, the investor must look outside conventional funding for their investments. Two of the more popular choices for alternative financing are portfolio loans and hard money loans.

Portfolio Loans

These loans are loans made by banks which do not sell the mortgage to other investors or mortgage companies. Portfolio loans are made with the intention of keeping them on the books until the loan is paid off or comes to term. Banks which make these kinds of loans are called portfolio lenders, and are usually smaller, more community focused operations.

Advantages of Portfolio Loans

Because these banks do not deal in volume or answer to huge boards like commercial banks, portfolio lenders can do loans that commercial banks wouldn’t touch, like the following:

smaller multifamily properties
properties in dis-repair
properties with an unrealized after-completed value
pre-stabilized commercial buildings
single tenant operations
special use buildings like churches, self-storage, or manufacturing spaces
construction and rehab projects

Another advantage of portfolio lenders is that they get involved with their community. Portfolio lenders like to lend on property they can go out and visit. They rarely lend outside of their region. This too gives the portfolio lender the ability to push guidelines when the numbers of a deal may not be stellar, but the lender can make a visit to the property and clearly see the value in the transaction. Rarely, if ever, will a banker at a commercial bank ever visit your property, or see more of it than what she can gather from the appraisal report.

Disadvantages of Portfolio Loans

There are only three downsides to portfolio loans, and in my opinion, they are worth the trade off to receive the services mentioned above:

shorter loan terms
higher interest rates
conventional underwriting

A portfolio loan typically has a shorter loan term than conventional, conforming loans. The loan will feature a standard 30 year amortization, but will have a balloon payment in 10 years or less, at which time you’ll need to payoff the loan in cash or refinance it.

Portfolio loans usually carry a slightly higher than market interest rate as well, usually around one half to one full percentage point higher than what you’d see from your large mortgage banker or retail commercial chain.

While portfolio lenders will sometimes go outside of guidelines for a great property, chances are you’ll have to qualify using conventional guidelines. That means acceptable income ratios, global underwriting, high debt service coverage ratios, better than average credit, and a good personal financial statement. Failing to meet any one of those criteria will knock your loan out of consideration with most conventional lenders. Two or more will likely knock you out of running for a portfolio loan.

If you find yourself in a situation where your qualifying criteria are suffering and can’t be approved for a conventional loan or a portfolio loan you’ll likely need to visit a local hard money lender.

Hard Money and Private Money Loans

Hard money loans are asset based loans, which means they are underwritten by considering primarily the value of the asset being pledged as collateral for the loan.

Advantages of Hard Money Loans

Rarely do hard money lenders consider credit score a factor in underwriting. If these lenders do run your credit report it’s most likely to make sure the borrower is not currently in bankruptcy, and doesn’t have open judgments or foreclosures. Most times, those things may not even knock a hard money loan out of underwriting, but they may force the lender to take a closer look at the documents.

Student Loan Consolidation – What Is It and What Can It Do For You?

Do you have multiple student loans tearing enormous holes in your pockets?

Do you want to learn how you can save money on your loans, get a better interest rate, and save hours of time on monthly paperwork?

Student loan consolidation is one of the best ways for you to do exactly that. And as you read this article I’m going to tell you how you can consolidate your loans to breath new life into your wallet.

By the time you’ve finished reading this article you’ll know:

What Exactly is Student Loan Consolidation?
Who is the Best Candidate for Loan Consolidation and Why?
What Type of Loan is Best For Your Needs

As you continue to read you’ll become a veritable expert on loan consolidation! That sounds pretty good, right?

So, What Exactly is Student Loan Consolidation?

Basically, loan consolidation is the practice of taking out one big loan to pay off all of your smaller loans. To be more specific than that you’ll have to first pick out what type of loan you want to consolidate to, but I’ll talk more about that later.

The benefits of doing this are numerous:

You can get a Longer Term Loan to spread out your payments better
You can get a Better Interest Rate to save yourself money
You can get a Private Loan to avoid dealing with the Federal Government
You can save yourself the hassle of filling out multiple loans’ paperwork each month

As you can see, under the right circumstances it seems foolish NOT to consolidate your loans. So who exactly is the best candidate for this practice?

Who is the Best Candidate for Consolidating Loans?

Well, it’s pretty simple actually. If you’re still in debt coming out of college then I’m willing to bet that you have multiple loans you need to pay off. In fact, I’d be willing to be that you’re really struggling to pay off the loans you already have, simply because of high interest rate and being responsible for so many loans.

I mean come on, it’s a lot to keep track of!

So if your a student or grad and you’re struggling to get out of debt, or just want to pay off all your loans as fast as possible, then student loan consolidation is a great idea for you.

What Type of Loan Should You Apply For?

To be honest a lot of this is going to be your own research. However, I can give you a few pointers in the right direction.

Here are a few questions you might ask yourself:

Am I Eligible for Any Special Deals on Federal Loans?
How Long Do I Want My Repayment Period to Be?
Do I Want to Guarantee Myself a Low Interest Rate (Hint: Go for a Fixed Rate Loan)
Would I Rather Take the Chance Interest Rates Will Go Down?
What Private Loans am I Eligible For? (Oftentimes these are the best deals)
How Much Interest Am I Paying Right Now? (You’ll have to figure your weighted average interest rate)

As you can see there’s a lot for you to consider before proceeding to consolidate all of your loans. However, if you take the time to shop around for the optimal loan, chances are you’ll be able to save yourself thousands of dollars.

Now listen, I’m willing to bet that you still have a few questions about all this…And that’s totally natural! Believe me, I know…Loans are an extremely confusing subject.