Four C’s Of Credit: How Banks Determine If They Should Accept Loan Applications

Four C’s Of Credit: How Banks Determine If They Should Accept Loan Applications

Getting approval for a loan application is no easy task. Everything needs to be perfect. And to be honest, banks aren’t entirely to blame either. After the 2008 financial crisis, the banking sector has become far more regulated. The lending criteria for banks have also become stricter. There are certain factors that banks take into account when they’re reviewing loan applications. These are collectively referred to as 4 C’s of credit. Let’s take a look at these: Character The first C of credit is ’character.’ This means that banks assess an individual’s character and determine if they are likely to return the borrowed amount or not. They start by researching your credit history. They’ll see if you have ever defaulted on your payments in the past. They‘ll also check your credit score. If you have a low credit score, the bank is likely to reject your application. The thing about credit scores is that they can be improved over time; so even if you have a bad score currently, you can work towards improving it at a later date. Capacity Capacity refers to a person’s ability to pay back the borrowed amount. It determines a person’s capability to pay back the loan by assessing their current income level and their debts. Lenders use the debt to income ratio to do so. They add together all the debts of the applicant with their income. A low debt to income ratio will increase your chances of getting the loan. Ideally, you should have a debt to income ratio of 43% or lower in order to secure the loan. However, there have been...
Why Investing Is Real Estate Is a Smart Choice

Why Investing Is Real Estate Is a Smart Choice

You might have heard investors talk about how the real estate sector in the US is a potential goldmine? Why do investors say things like that? What is it that makes the real estate sector so appealing? Investors are always on the lookout for investment opportunities, and all signs indicate that the real estate sector will be an extremely lucrative market in the near future. Statistics suggest the same. In 2017 alone, there was 11% growth in this segment. If that’s not enough, take a look at some additional reasons why the real estate sector is considered to be so lucrative: Affordable Start with looking for property in residential areas. If it’s a popular place, the prices might be high; but you’ll also be setting the rent accordingly, so you’ll recover your investment after some time. Furthermore, you always have the option of investing in property in the outskirts of the city. These properties are affordable. Their average rent is also relatively high, so it’s a win-win situation for you. Steady Cash Flow A lot of people invest in real estate in order to prepare for their retirement. That’s because real estate investments ensure a steady stream of cash in the form of rent. Rental income is usually high and it covers additional expenses like maintenance and insurance. Over time, you can save up money and invest in more property. Another benefit of investing in real estate is that property value rarely ever depreciates. If anything, the prices increase over time. So later on, you can sell the property at a higher rate and make a hefty profit. Multiple Options...
HARD MONEY SCAMS HOW TO AVOID THEM

HARD MONEY SCAMS HOW TO AVOID THEM

Loan Approval Without Property Evaluation Before approving a hard money loan a legitimate lend will either conduct physical inspection of an investment property or perform an in-depth assessment of an investor’s loan application details. Since hard money financing”s riskier than a traditional bank loan, hard money lenders won’t approve loans without doing their own homework. Request For An Upfront Fee If your hard money lender asks for an upfront fee, something is just not right. Fake lenders usually ask borrowers to pay a high upfront fee before funding the loan. While hard moneylenders do charge service fees, you should beware any lender who charges heavy upfront fees before closing. Provision of 100 % Funding Some fake lenders will promise 100 percent financing on a real estate property in exchange for the payment of a high fee. Keep in mind, majority of real lenders will only provide i50-155 percent funding of the collateral’s value. If you feel morn hard money lender is making outrageous claims, trust your gut. Excessively Low Interest Rates In most cases, hard money interest rates range from 12 percent to 18 percent. However, if the rates are lower than 10 percent, it may be a major red sign. Honest lenders will clearly inform borrowers their rates. Some tips for choosing a reliable hard money lender Ask a hard money lender for client references. Speak with these clients about their experience with the lender. Conduct proper research on the lender online. Check out their website and customer reviews. Inquire about the Loans they have closed. They should be able to demonstrate a solid track record. Have a personal...
3 Reasons A Bank May Turn Down Your Loan Request

3 Reasons A Bank May Turn Down Your Loan Request

For many real estate investors, banks are the most common and reliable sources for project funding. The process is simple—you choose a bank; submit your loan application along with necessary documentation and then wait for an approval. Sounds pretty straightforward, right? While you may personally know people who got loan approvals within a month, it’s not the same case across each loan application. In fact, you could be sitting months in anticipation only to be rejected in the end. But knowing the fact that banks have certain criterion and there are regulatory bodies in place to enforce that criterion, rejections are inevitable for some people. From poor or low credit score to lack of real estate experience, here is why a bank may turn down a real estate investor’s loan request: Poor Credit Score Whether you need a bank loan for a real estate project or to purchase a home, traditional lenders and banks check an applicant’s personal credit score and history before offering funding. The fact is that an applicant’s credit score reflects their financial worthiness and their ability to repay the loan. Therefore, banks consider your personal and business credit score when evaluating your loan request. If you have a low or poor credit score, there is a significant chance that your loan request will be denied. Insufficient Monthly Business Revenue In order to successfully pursue a bank loan, you need to demonstrate to the bank that you are making sufficient revenue every month. High monthly revenue assures banks that you have the funds to repay the loan. Lack of Business Experience In many cases, an applicant’s...
Fix And Flip 101: Does The Age of A Home Matter?

Fix And Flip 101: Does The Age of A Home Matter?

Flipping properties is a great way to make substantial amounts of money in a short-time period. However, the first step is the most challenging—finding a property that you can practically renovate. Needless to say, flipping properties requires intensive planning, research and analysis of the financial numbers. Before purchasing a distressed property, you must check its condition to ensure you can adequate returns on your investment. Fix and flip investors deal with older properties, typically over 10 years of age. Conducting a thorough inspection of the property is a crucial part of the flipping process as it can help you determine how much budget you need to renovate it. Remember that the older the property, the more upgrades it may need, which means high repair and renovation costs. When inspecting the condition of a 10-plus year old fix and flip property, here are some important things to focus on: Exterior   Start the inspection process with the most visible part of the house i.e. the roof. A good looking roof indicates that the property has been maintained. It also has a significant impact on the curb appeal of the property. Are there any missing, broken or damaged shingles and flashings on the roof? Over the course of time, heavy storms, rain, snow, heat as well as wear and tear can take a toll on roofs. Along with causing water leaks, mold and mildew, a damaged or poor quality roof can be dangerous. Damp spots along the fireplace are a common sign of a leaky roof. In addition to the roof, pay attention to the overall architecture of the property as...