Christian Hard Money Lenders
When an investor doesn't have great credit, Christian hard money lenders can help him finance a note. These investment professionals offer short term obligations, also called bridge funding, for higher than normal interest rates. They are based on the value of the real estate being collateralized. This type of financing usually comes at a higher than normal interest rates, because the person does not fit the necessary requirements of standard institutions. This is not to say that these professionals have no required standards. Instead, they have requirements about value percentages, the type of real estate that is collateralized and minimum and maximum amounts that they will give out.
Traditional credit guidelines are in place to protect banks and other financial institutions from the risk of default and foreclosure. These guidelines often include proving income, minimum acceptable credit score and length of employment. Because they are foregoing these guidelines, the large interest rates help to pad them in the case of defaulting clients. This has proved wise, as defaults are much more common among bridge obligations than they are for standard ones from banks or credit unions. This higher interest rate may still be better than not getting a funded at all due to poor credit, recent job loss or the lack of necessary documentation.
When seeking this type of financing, it is common to offer the real estate being purchased as collateral. However, it is acceptable to offer other forms of assets as well. Companies typically require a smaller debt to value ratio, thus the amount a individual can finance is smaller. For example, this sort of institution may require a sixty percent equity to value ratio, which means that it is only willing to lend sixty percent of the value of the real estate being purchased. This leaves the borrower to provide forty percent of the value. When forty percent is simply more than one can pay, other property can also be collateralized to increase the amount. When real estate investors offer more than one piece of land, it is called cross collateralization.
There are regional and nationwide asset lenders. They can either work directly with applicants or use brokers who prepare the documentation. In the cases when brokers are used, he will take a percentage of the profit (which is called points). These types of ventures may also require an application fee and charge a prepayment penalty. These actions are all in an attempt to recoup some of the funds lost in the higher than normal default rate among their high risk clientele.
There are many regulations overseeing the business practices of these types of companies. Two states, New Jersey and Tennessee, have usury laws that prohibit the practice. However, the regulatory oversight of these businesses differs from state to state. There are also laws governing whether or not the monies can be to an individual or has to only be commercial. This is in an attempt to further protect individuals from defaulting due to the astronomically high usury.
Commercial lenders are those whose clientele are strictly corporate investors, as opposed to individual home buyers. The asset is either business property or investment real estate. If additional collateral is needed to make up the difference in the value ratio, then a residence can be used. Collateralizing a residence in conjunction with a corporate property to gain a higher debt amount is called a blanket mortgage. "The rich ruleth over the poor, and the borrower is servant to the lender." (Proverbs 22:7)
Some professionals have given borrowers hope when all seemed to be lost. These types of professionals are so aggressive that they will grant to an individual who is currently in foreclosure, a person with a pipe dream of running their own business but has no personal investment value or a client who does not even qualify for a sub-prime. These scenarios are all too risky for standard financial institutions. However, with the increased interest rates and all of the fees and charges, make a respectable profit from their line of business. They are typically private investors or small ventures willing to take a risk. If the fees are worthwhile and the interest rates are high enough to make the risk worth it, there are investors who are more than happy to put down the dinero. These individual investors are hard to find, but brokers usually connect those who are in desperate need of the funds with investors willing to take the risk for the chance at a great profit margin.
Sometimes advances are not sought because of default, but because of the regulations over banks and financial institutions. Banks are hesitant to advance for housing that is nontraditional (uncommon framing or concrete block foundations) or residences that derive more of their value from the land than the house built on it. In these cases, merely being rural would necessitate seeking different types of funds to build the residence. In addition, they will offer monies to those in foreclosure. The person can use the money to pay off the original contributor and take some more time to sell the property, rather than have a foreclosure on their permanent record. This would be especially helpful if someone lost their job, but then found employment. Their house would be in enough delinquency to prohibit paying the original note down, but the new job would make paying the payments a possibility.
Christian Hard Money LoansTypically, funding are not usually offered by national chain companies and certainly not banks, but rather by private investors in a specific locale where the transaction actually is taking place. These are lending agreements that use the parcel value of a piece of land as collateral for securing currency. These type of situations are similar to what is known as a bridge notes that lends money on property that is transitioning from category of zoning to another or from category of use to another. In both cases, these scenarios have very high interest rates, and are based usually on a ratio of about sixty to seventy percent of the property's actual appraised value, although with the high volatility of the mortgages markets, sometimes the percentage can drop to as ,low as fifty percent. If a parcel of land is valued at two hundred thousand dollars, these two types of situations would offer the borrower about one hundred twenty to one hundred forty thousand dollars of borrowed money or as low as one hundred thousand dollars. With terms to value ratio, the acceptance protects the investor quite securely if a defaul takes place.
Bridge contracts have had a volatile history, because during the 80's and 90's, investors often over valued land parcels in order to make high interest profits only to find the land never sold for anything close to the supposed value the investor envisioned. If a parcel property already has a mortgage on it, the banker will often agree to use other property owned by the borrower as an asset. These contracts are basically unregulated by state laws which make it sometime a fairly dicey kind of transaction, so much so that a few states have practically banned them altogether. But since these situations are quite unregulated in the majority of states, the speeds at which the deals can be struck make them a favorite for those seeking quick money. Scams have often taken place with local companies who take huge fees to investigate a land but never intended to actually give the money while keeping the large fee.
Obligations will often have interest rates of fifteen to twenty five percent, and sometimes as much as thirty percent. In addition to these high interest rates, the contracts can also carry three to six points for the cost of formulating the deal. On a two hundred thousand dollar real estate, six points would be twelve thousand dollars in origination fees, a very exorbitant amount. These contracts can often take place in as little as seven business days and sometimes can be formulated as interest only. "Judge not, that ye be not judged, for with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again." (Matthew 7:1, 2)
A real estate investor might be a prime candidate for various financial options. For instance, the fellow finds what he/she believes to be a choice piece of land and wants to eventually build a community of home, so seeks out a firm who will give a cash for fifty to seventy percent of the appraised value of the real estate. The contract may require that the real estate investor put up twenty percent of his/her own money while other may be sought for the remaining value. Online searches will reveal a number of companies willing to provide short term assistance. Short term would be defined as one to three years, but a number of the companies don't want to deal with deals below a million dollars.
Investors who provide dough are local people who know intimately the value of certain properties in his/her area and are willing to take a moderate amount of risk for a big profit. These fellows are sometimes hard to locate, but have been known to reach out to borrowers already in foreclosure, or to refinance a mortgage so that the debtor can take out large sums of cash from the deal. It is a business which makes deals to those who are in desperate straits. It's a situation that is often the last resort for hard luck borrowers. It's a deal that doesn't usually ask for a credit score, only for proof of the numbers involved.
Most Christians have been known to do some desperate things when facing a wall with nowhere to go and these last resorts are on that list of last ditch efforts. When the world is caving in and no one has answers and a person is left to his/her own devices, some really bizarre decision making can take place, and an awful lot of that bizarre behavior is self destructive. Like many animals seen at zoos, humans can pace and claw and jump and scream and try every way possible to escape a predicament. But the Christian life offers a much better way. Some people mistakenly believe that there is actually a Bible verse that says God helps those who help themselves. Sorry, but that one does not exist. When faced with the wall and nowhere to turn, here are some words God offers his children: be still and wait; stop all the activity and all the noise and really let Him work out a solution; allow God to work like the loving heavenly Father He is.