No Money Down Loan Options.
Many Real Estate Investors find opportunities to buy property below market value and rehabilitate them to bring them into code and make the property leasable or saleable.
In those instances when you can acquire a property below value and increase its value to true market value creating true equity in the property there maybe no money down loans available to you.
The conventional residential or commercial investor conventional real estate financing guidelines require that the borrower and the property qualifies based on convention secondary mortgage program parameters.
These guidelines do not allow for these no money down loans for real estate investors.
Hard Money or Bridge Loans.
Hard Money or Bridge loans are primarily based on the property and its after rehab value.
Lenders for this type of mortgage are usually private investors who make their own guidelines versus having them based on conventional real estate guidelines.
One such limiting conventional guideline considers the value of the property is the lessor of the purchase price or the appraised value.
Furthermore, in conventional financing the appraised value would not be considered as the true market value for financing purposes until it has been seasoned or owned for more than one year.
Seasoning in this case is the length of time the property has had its current ownership.
Therefore, the appraised value becomes the market value after it has been owned for one year by its current owner.
This seasoning requirement for conventional financing is not an issue with hard money or bridge loan lenders.
By using the after rehab value to determine the maximum amount of money to lend there are then opportunities for no money down loans for real estate investors.
After Rehab Value.
To qualify for these real estate investment opportunities many bridge money private lenders lend between fifty per cent to sixty-five per cent of the after completed value.
The determining factors are different from lender to lender depending on the other loan criteria.
If the lender is just looking at the property and does not qualify the borrower then the loan to value would be sixty five per cent or less.
When the lender considers the borrower qualifications after rehab value the loan to value may increase to sixty five or seventy per cent, again always based on the lenders criteria.
Finally.
A significant factor with these no money down loans for real estate investors is their total costs.
These hard money or bridge loans have high fees and high interest rates.
They make sense only as short term loans to real estate investors who can sale or refinance them quickly based on the value of a newly renovated property.
Who wouldn't pay higher fees and rates to make a substantial return especially if they may not be required to even have a down payment to realize that substantial return on the investment opportunity.
A Hard Money Lender can help you meet your real estate investment goals.