The Harper Herald

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

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

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

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?

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...

What is The Difference? Short Term and Long Term Loans.

A loan is divided into two main categories that are further divided into different types of loans people opt for. We all keep hearing about short term and long term loans that help people combat their financial crisis and lead a better life. A borrower ask for a loan for various purposes. He or she has to return the amount within a said period of time. A loan has to be paid with interest. These loans have distinct aspects that make them different from each other. SHORT TERM LOANS The time period for short term loans is up to 3 years. These loans include payday loans and flexible loans. Payday loans are borrowed by a person when there is an emergency such as car breakdown. It can also be borrowed when you are taking a vacation or stumble across unexpected bills. The amount to be returned is taken from your bank account on your next pay date. Payday loans are up to 2000$ FLEXIBLE LOANS Flexible loan is a credit based loan that is up to $ 25,000. The term for this loan is 12 months. This loan comes with a higher interest rate than long-term loans. LONG TERM LOANS As the name suggests, long-term loan extends to a longer time period. The time frame to repay the amount depends on the lender, type of loan and your intended use of the amount. It includes mortgages, student loans, start-up loans and wedding loans. It is credit based and can be given in the form of secured or unsecured loan. A secured loan requires asset that can be kept as a...

Real Estate Investment: Setting Yourself Up for the Marathon

For many, real estate investing is a short-term game. You get in, invest, make more money, and get out—pretty much like a sprint race. However, those who are willing to ride the changing tides of the market and navigate their way through the cut-throat competition; for them, real estate investing is a more long-term opportunity. They view it as a marathon. Naturally, their gains and returns are also stronger and higher than their sprinting peers. What type of real estate investor do you aspire to be: a sprinter or a marathon-runner? The latter? Great! Of course, like every good marathon runner, we’re sure you’ll be preparing yourself in advance for the big, long race, right? If so, we believe you’ll find the following tips helpful in achieving your objectives. Integrate them into your business strategy if you haven’t already done so. Master one sector at a time Real estate investing is a diverse field with many facets. Speaking of primary categories, there are residential, commercial and industrial property investment opportunities. Dissecting each primary investment category further, there are multiple other investment opportunities. As a long-term real estate investor, your approach should be to perfect one investment category at a time. Once you’ve mastered one category, you can then move to the next. Step by step, you’ll eventually be able to build a well-rounded skill set and prime yourself with the required knowledge and experience to establish an impressive and profitable investment portfolio. Focus on building a dependable team of experts You’re committing to a long marathon, and there’s no way you can run this marathon alone. To be successful,...

Important Questions to Ask When Evaluating a Fixer Upper for Investment

To be a successful fix and flip investor, you need to have a strong eye for the right type of property. Make no mistake, there is no dearth of fixer uppers out there; every block in every neighborhood has one. However, you need to find a fixer upper that gives you the best chance to maximize your returns. How to know if the fixer upper you’re interested in fulfills this criterion? Ask yourself these three important questions. What Does The Fixer Upper Have To Offer In Terms Of Location? Location is the most important aspect of any residential property and fixer uppers are no different. A fixer upper located in a safe, clean and convenient neighborhood is likely to be more appealing to potential homebuyers than a fixer upper located in an unsafe, dirty and remote neighborhood. Make sure that the fixer upper you’re eying is located close to community amenities and in a neighborhood where crime rates are low. How Much Will It Cost To Restore The Fixer Upper? A fixer upper requiring significant restoration should be avoided, even if it’s located in an ideal neighborhood. Such types of properties carry big investment risks and often fail to provide adequate returns on investment. Survey the property you’re interested in with your contractor to determine its true cost of restoration. Research what needs to be done to bring it on par with other in-demand residential properties in the area. Check whether the investment fits your budget. Ensure it does not involve expensive repairs and remodel. Will I Be Able To Sell The Property Quickly? This is another important question...

Signs You Need to Switch Your Alternative Real Estate Lender

People that have been conducting property deals know the benefits and drawbacks for sticking with one lender for too long. Loyalty in business dealings has its perks but you need to be looking out for your interests—sticking to your lender can be costing you. Switching your loan lender can be more profitable for you. Their product offerings may be better suited to your needs and loan approvals may take shorter time. To determine whether it’s time to switch loans, ask yourself if your needs are being met. How long does loan approval take? Would it be better for you if loans were approved faster? Is your business being slowed down due to lagging loan approvals? If you’re current lender is proving to be an inconvenience in your business, it’s best to look for a new lender. The greatest benefit of private loans over loans given by banks is that they provide more flexibility and quicker service. Generally, private loan offer a win-win situation for both the lender and the borrower. Consider the following factors: Flexible Financing Solutions These are required for a range of portfolio projects. Loans taken out from traditional lenders don’t require much flexibility but by opting for a private money loan, you have access to a much larger, more diverse pool of lenders who are more accommodating to the unique needs of borrowers. Don’t settle for a lender that isn’t adequately meeting your needs when you can be matched with a lender that’s willing to provide added flexibility. Transparency Communication is imperative in property deals since your ability to make profit is so dependent on the...

Understanding the Costs of a Hard Money Loan

Those who’re looking to refurbish worn out property and sell it for profit can use hard money loans to finance those projects. Companies that offer hard money loans gather private investors who want high-interests on the funds they provide and rehab borrowers that fix and flip properties. Generally, when the real-estate market is improving, there is a splurge of rehabbers who turn to hard money loans to fund projects. How do Hard Money Loans Work Hard money loans are offered on a short-term period; they usually run for 6-24 months. Before the loan period ends, the borrower is expected to make a balloon payment that consists of the interest amount and the principal too. The funding received from hard money loans covers 60-80% of the final value of the property after repairs have been made. Compared to conventional loans, hard money loans have higher interest rates along with greater lender fees and extra charges. There are two cost-components you’ll need to consider in hard money loans: interest rates and up-front points. Interest Rates As mentioned above, interest rates on hard money loans are substantially higher than on loans that are given by traditional institutions. Because hard money loan lenders are taking a greater risk by offering a large sum of money, they require a larger amount of interest in return—the larger the loan, the greater the interest. Hard money loans usually start at an interest rate of 7%; on average, they are offered with a 10% interest rate but this can increase depending on how big the financial risk is. Up-Front Points When it comes to hard money loans,...