Close More Escrows With Alternative Lending

When real estate agents dream...they likely dream that every buyer will have cash-in-hand and be ready to buy. Escrows would close faster, there would be a less paperwork, and no escrow would ever be canceled due to a lack of financing. The truth is, although most buyers can get approved for a standard Fannie Mae loan, there are situations where homeowners get a taste of real estate investing, and find that it can be both incredibly lucrative and exciting. Maybe they make the decision to sell their home and get quite a bit for it. They then decide to buy another property, thinking it’s as easy and painless as their first mortgage, and then BOOM! Reality hits them right in the face. Something has happened that’s keeping their loan application from getting approved. They can’t buy, the sellers can’t sell and the real estate agent is out of a commission. Nobody wins and nobody’s happy when a situation like this happens -- but the good news is that there are alternatives.

How Alternative Lending Can Help

Alternative lending has easier requirements in order to quality and thanks to the numerous programs available, there’s something for nearly every financial situation. Most alternative lending options fall into one of three categories:
  • Nonprime Lending - This type of alternative lending is recommended for buyers who just barely fall outside of the traditional lending requirements of major banks and institutions
  • Subprime Lending - Subprime lending is designed for buyers who have more income and credit challenges.
  • Private Equity - Private equity is for borrowers who have considerably poor credit, are buying a home in need of major repair or need money urgently.
Today’s most common alternative lending programs often require as much as 25% of the down payment. If the buyer has that much in financing available, then many of the other obstacles, such as income verification and credit score are no longer required --they’ve demonstrated financial capability, so they can buy, the sellers can sell and you can earn your rightful commission.

How Can Alternative Lending Help Me Close More Escrows?

There are several situations in which alternative lending can be the bridge that connects buyers and sellers and enables you to help the buyer secure funding, most notably by offering this option to: Buyers Whose Tax Returns Don’t Accurately Reflect Their Income Tax returns aren’t always the most accurate window into a buyer’s income history. Fortunately, you can use anywhere from 12-24 months worth of bank statements in order to prove their income. In certain scenarios, stated income can also be applicable. Condos that Aren’t FNMA/FHLMC Approved With alternative lending, there’s no requirement to obtain a FNMA condo certificate. Buyers with Lower FICO Scores If the buyer has a lower FICO score due to bankruptcy, they can still get their loan approved immediately afterwards. If the buyer has a foreclosure, they don’t need to wait several years to apply for financing. And if the buyer has needed to do a short sale, this isn’t considered a foreclosure, so those rules don’t apply. Buyers Who Need Down Payment Documentation Alternative lending through private equity can provide additional benefits, such as financing a property that is in need of significant repair. If your client is a “Fix and Flip” buyer or is interested in putting in the time and effort to fix up and sell a property that needs more than a little TLC, the bank may not even give them the time of day, but financing through private equity can help them secure the funding they need.

Is Alternative Lending an Option to Help You Get More Closings?

As you can see, even buyers that the bank would traditionally turn away on account of low credit scores or lack of income can ultimately be clients with whom you can close more escrows through alternative lending programs. And who knows, with the right financial backing in your corner, you may be able to get prospects approved for funding that would never have had a chance with traditional lending, and this could in turn help give those buyers the cash they need at an affordable rate. It’s understandable that you may have many questions about how alternative funding works and how private equity can help you reach those promising “fix and flip” buyers, among others. We’d be delighted to help you learn more about alternative financing, including stated income loans, loans with no income verification and many other types of alternative loans that can help you buyers realize the goal of home ownership -- whether it’s the first home or their fifth! Give us a call today to speak to our dedicated, professional alternative lending specialists and let’s work together to help you reach more clients and close more deals through the power of private equity and other types of financing.

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