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Warning: Mortgage Credit Becoming Harder to Get

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on Saturday, 25 May 2013
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Contrary to some optimistic reports mortgage credit is actually becoming harder to get. So how tight will access to loans get and what’s the fallout for real estate investors?

There may have been some loosening in mortgage lending recently, at least in a few niche pockets of the market, but the hard data surprisingly shows the majority of banks and lenders being even more cautious in 2013.

Commercial underwriters might be opening the flood gates and a few major banks say that they are more willing to loan on strong applications with 20% down and 720 plus credit scores. However, more lending institutions responding to a survey in 2013 say that they are less likely to approve home loan applications for those with less than 720 credit scores or 20% down payment than they were before.

But that’s going to change soon right?

Analysts interviewed by Inman News say quite the opposite. They think ‘Chicken Little’ might be quite the optimist in light of what is going on in financial markets today. They see the sky falling in and the earth dropping out from under us at the same time.

Why?

This doom and gloom is in response to Consumer Protection Act and Dodd-Frank rules set to come into play in the new year. Experts say they are “certain” this will mean fewer home buyers will qualify for loans and those that do will have to pay much higher fees. This is on top of interest rates jumping to a two month high at the end of May 2013.

Of course truly knowledgeable and savvy real estate investors and financial experts know that mortgage lending and access to credit will absolutely lighten up. There were plenty of media outlets and industry voices proclaiming the housing market would never turn around but it has, and these same macro cycles will inevitably and invariably lift the mortgage market as well, and even spawn new exotic loan programs.

Of course this may take a couple of years. In the meantime, at least for real estate investors there are plenty of alternative funding sources including transactional lending, hard money loans, private lenders and commercial mortgage companies offering bridge loans and blanket mortgages.

Those flipping houses really have little to worry about on the sales side either, at least for now. Demand is at an all-time high, there is plenty of room for growth and there is virtually endless capital to pay cash for real estate, even if it is mostly off the grid and not evident in regular economic reports.

Still, for those eager to make a killing in real estate, the time to make a big push while the stars are perfectly aligned for flipping houses is now.
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Hurricane Preparedness For Your Real Estate Investing Business

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on Tuesday, 30 August 2011
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Hopefully you haven’t been to badly affected by hurricane Irene, though with 3 more months of this year’s Atlantic hurricane season to go and 8 more hurricanes forecast you must make sure that your real estate investing business is prepared.

There are many resources online for tracking storms, finding tips for protecting your properties and advice on battling with your insurance company to get what you are owed. However, what is equally if not more important is business continuity and having your real estate investing business prepared. There may not be much you can do to prevent property damage if a category 4 hurricane sweeps through town, but you can survive losing a property or two a lot easier than being out of business for several week or months.

If you are not prepared and set up to stay wired and connected when a storm rolls in you are asking for trouble. It is usually not the impact of the hurricane itself that kills businesses. It is not having internal or external communication and access to crucial data. This means no deals are being done, all of the marketing you have out there is wasted, staff will leave and your competition will move in. By the time you catch up it could easily be 3,6 or even 12 months down the road. Can your business and your bank account take it?

So what should you be doing to prepare your real estate business? By utilizing Internet phone services which can be forwarded anywhere, using cloud computing technology for accessing databases, storing information and collaborating and having remote staff on call you can keep on operating without missing a beat.

Though this is also a time to line up back up financing sources so that you can still close those deals you were working on and take advantage of hot opportunities with flash funding and transactional lending.
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Marketing Funds From Your Transactional Lender?

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on Tuesday, 23 August 2011
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You have no doubt already found your transactional lender invaluable when it comes to flipping houses quickly with minimal risk and for maximum profits, but can they help you with your marketing expenses too?

If you are serious about real estate investing, regardless of whether you are flipping a few houses a month with funding from your transactional lender or you are focus mainly on buy and hold you probably have a good amount of marketing going on. This may include direct mail, telemarketing, display advertising, your website, a blog, PPC advertising and social media marketing. Whatever you are doing, it can certainly add up, but obviously you can’t expect to be flipping a significant number of homes each month without some type of advertising.

So how can you off set your marketing costs or tap into additional money so that you can expand on what you are doing?

One of the easiest ways to add to your income every month is through referral partner or affiliate programs. This is especially true if your real estate investing enterprise does a lot of online marketing. You can easily monetize your blog and website and even social media by allowing or running affiliate ads. This pays you a commission for every visitor who clicks on an add or buys something from a partner. This can be done through PPC with Google Adwords, affiliate directories and networks like Clickbank or Commission Junction or by hand selecting complimentary services.

If you haven’t asked your transactional lender yet they may have a referral program too. You probably run into other investors and buyers everyday who could use a transactional lender and who would be really grateful for the referral. So why not get paid for it? You could be making up to 10% of the fees your transactional lender makes on their transactions. It doesn’t take a genius to see that this could quickly build up to quite a nice marketing budget every month!

Come back next week to find out how to make even more from referral networks...

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Where To Find Your Deposit Money

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on Tuesday, 26 July 2011
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Despite the availability of 100% financing for purchasing and flipping investment properties with transactional funding some in search of true no money down deals still struggle to come up with earnest money deposits to lock down the most attractive bargains whether they are foreclosures, HUD homes, short sales or from other distressed sellers.

Transactional funding does offer 100% financing to cover both the acquisition price plus closing costs, but if you have to come up with a deposit to get a signed contract and you are running short on cash what are your options?

Obviously reaching out to friends and family isn’t ideal. You can try other investors and offer them a piece of the pie but that can really dig into your profits and mean giving up some control. Though don’t give up yet.

If you still have a regular job too then you can always try getting a payday advance loan. Normally they do not require any credit checks and can be funded in hours. You can also get a cash advance from one of your credit cards and pay it off within the grace period to avoid finance charges. If you don’t have a credit card or good credit and you do have savings but just don’t want to use them, then consider a secured credit card or secured line of credit from your bank. This will also help rebuild your credit rating.

If your credit isn’t bad then what about a signature personal loan from a local bank? Of course it is much better to keep your personal and investment credit separate and you will want to register a business to work under if you haven’t already. This opens the door to obtaining a business line-of-credit or even getting an AMEX card.

If none of the above are options, don’t panic yet. Transactional funding is often referred to as ‘flash funding’ for a reason - you can close in just days. There is a good chance that if you can close fast enough you won’t even need to make a deposit. If you absolutely must then ask your transactional lender about a Proof-Of-Funds (POF) or Verification of Deposit (VOD) letter which may be sufficient to help you get the deal accepted.
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6 Advantages Of Transactional Funding

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on Tuesday, 19 July 2011
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1. No Qualifying
Transactional funding requires no qualifying like you have experienced when applying for a conventional or even hard money mortgage loan. There is no credit check, so it doesn’t matter if you have had a few bumps and bruises in the last few years or you previously went through a bankruptcy or foreclosure. You won’t have to verify your income, how much money you have in the bank or even if you have a job. You don’t even need an appraisal. All you do need is a qualified end buyer who you will flip the property to.

2. Quick Closings
You can get your transactional funding approved and to the closing table in just a few days, which is why it is often referred to as ‘flash funding’. It is great to have as a back up even if you have plenty of cash just in case something comes up so that you won’t miss your closing. Plus many property wholesalers today will only give you two weeks to close if you want to get the deal. So if you want the best bargains and the biggest profits you really have no option but to pay cash or use transactional funding.

3. Act As A Cash Buyer
The speed that transactional funding provides and the fact that there are no underwriting hoops to jump through means that you can really act as a cash buyer and demand even bigger discounts when making offers on properties. This will give you a decisive edge over your competition and allows for either making a larger spread on each deal or being able to flip houses with a lower retail price tag so they move faster.

4. 100% Financing
Transactional funding provides 100% financing of your purchase price plus closing costs enabling true no money down real estate deals.

5. Lower Risk
Having access to a great transactional lender means being able to flip homes quickly and easily, getting in and out without the risks associated with holding or speculating on appreciation.

6. It’s More Affordable
If you have used conventional mortgage financing or hard money lenders to fund your real estate deals in the past you know that hefty junk fees and paying lots of points can seriously dig into your profits and make or break a transaction. You will find transactional funding a lot cheaper, leaving more money on the table and in your bank account.
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Is Transactional Funding Legal?

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on Tuesday, 05 July 2011
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Staying on the right side of the law or at least avoiding extra unwanted attention from the authorities can sometimes be a tricky business when flipping houses. Unfortunately many out dated real estate investment courses and programs provide information that either doesn’t work any more or has become illegal. However, this does not include transactional funding.

Dry closings or simultaneous closings where an investors uses a buyer’s money to fund a double closing and pay the seller are definitely frowned upon and can at the very least get you the wrong type of attention. Plus of course it does pose technical issues with recording deeds in time to satisfy the end buyer’s lender’s requirements which can jeopardize your deals.

Flash funding or transactional funding is different. This type of financing provides you as a real estate investor with the funds to close your A to B transaction with the seller, with real money. Then you can have a separate closing for the B to C side which cashes you out with your end buyer via a cash purchase or their bank financing. This is completely legal, though the mechanics may need to work slightly differently depending on where the end buyer is bringing their funds from.

In many cases you can easily close both ends of your deal within three days often even on the same day. However, in circumstances when the end lender wants to see the recorded deed from the first transaction you may need to wait as long as a couple of weeks. Thankfully the best transactional lenders are now rolling out extended financing options that can give you as much as 40 days to re-pay the loan.

So yes, transactional funding is completely legal and above board, though if course as always it helps to use a title company or closing attorney who is comfortable with this type of real estate deal, knows how to facilitate a smooth transaction on both ends and is familiar with how different lenders require things to be done.
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