Do you all asset based lenders do this?

Question

Do you all asset based lenders do this?
So I was referred to an asset based lender. They talked great game and said that I was a great fit. They explain their Lending and refinance program and so I find a property that fits it. They pull my credit were very happy. They asked for copies of my bank account and were very happy. They ask for a copy of my tax returns for verification that I’m not behind on paying my taxes. They say everything looks good. Then after you spend the money on your appraisal they start asking for more and more. I provided a copy of the lease quite a long time ago at the beginning of the process. Now today days from closing they find fault with the way my lease is worded because it has turned into a month-to-month lease after a number of years back. It appears that the person talking big game was simply a paper collector that had no real decision-making powers and the folks doing the underwriting Are looking for stuff to create a problem where no problem exist.

Eric Goldman · Answer

I have had concerns raised for m-m leases with some commercial deals but not 1-4 units. Not all asset based lenders  need yearly leases. Every one of these companies has to follow guidelines as @Jeff S. pointed out also with other great info. if it the deal and the borrower fits the guidelines it gets approved.

Joe S. · Answer

@Jeff S. thanks for the insight. Before we got this far I produced quite a number of properties that I bought and sold in the last few years. unfortunately like has already been pointed ou I am dealing primarily with a paper collector and he can promise me the stars and not already have no real authority to fund a deal. The guy/paper collector finally told me last night that he did not have any real authority etc. he then went on to tell me that I was the most qualified client he had due to my experience and the amount of deals I have done as well plus my credit score etc. So if I am his most qualified customer then he is dealing with a company that is trying to make investors plain vanilla and Giving them a hard time if they’re not. I have one lender that pulled my credit once and that was almost 6 years ago we have done multiple deals since then since then and not one time since has he ever asked pull my credit again nor has he ever asked to see my tax returns or bank account.  He says I buy in the money and I make my payments on time and he’s want me to get more business to his office. He does not even escrow my taxes and insurance like he does others The reason why I was trying to go with the other lender is because they offered a better interest-rate.I was basically trying to branch out and broaden my options. This might still happen,  but is it frustrating.

Jeff S. · Answer

Some hard/private money lenders are all but indistinguishable from conventional lenders, @Joe S. It’s common now for an HML to obtain its money from outside investors.  These include small, syndicated fund investors to Wall Street.

The investors behind syndicated money don’t always understand private lending.  They know the criteria they had to follow when they obtained a mortgage for their personal residence or other bank loans and believe this is the only way to make a safe real estate loan.  If you want their money, you play their game so the HML’s agree to use lending criteria that often mirror that of a conventional loan.

Conventional loans require tax statements, W2’s, maximum DTI, credit reports, and any number of additional documents to prove your metaphysical existence.  This might work if you’re relying on someone’s income to pay you back.  The problem is that none of it proves your borrower knows how to flip a house to earn the profit from which their lender takes a cut.

For this reason, I wouldn’t know what to do with your credit report if it hit me in the head.  The last thing I want to do is lend to someone I hardly know who has an 800 FICO score but has either never flipped a house or has minimal experience.

Similarly, every experienced house flipper we know does not have a steady income.  They make their (often substantial) money as they sell their flips.  We make our money as each flip is sold, not from your daily job. DTI and tax returns here are, therefore, irrelevant.  Our safety comes from your experience and ability to flip a house profitably.

My best advice, Joe, is among the first and most informative questions any borrower should always ask any potential lender is where they get their money.  None of this is personal, private, or invasive.  Some will be direct lenders (loan their own money), syndicators who obtain their money from private individuals to Wall Street, some will be licensed brokers (who legally are your fiduciary), some affiliates (unlicensed commissioned salespeople), note sellers, correspondents, hypothecators, use white label paper, etc., etc., etc.

If you don’t understand where a lender gets its money, and how it will process your loan, you might reconsider borrowing from them.

Account Closed · Answer

ive been working on piece of software to help manage it all and hope to scale it up In a few years to franchise home builds but to our quality standards and designs.

this sub division project will give me enough capital not use bank money again... Next step for me on a 5 year plan is venture capital money when we are ready to go public.

Account Closed · Answer

All of these lenders are the same. The worst being Lima one.

im about to give up equity in my spec home business to cut out banks and private money completely. Works out to save me about $8000 per home build by ditching private money and banks..not to mention the paperwork nightmare.

George Despotopoulos · Answer

Sorry to hear about your poor experience. Some non-bank / private lenders are definitely set-up quite differently. Typically we "pre-underwrite" which basically just means asking the right questions, going through different scenarios, making sure everything is in order prior to get into actual underwriting. It doesn't delay things at all and is covered in 1 call or in a few email exchanges.

Patrick Prunty · Answer

@Joe S.

I'm sorry you had to go through this but you need to find a new lender.  If an asset based lender askes for all the stuff that a conventional lender asks for, what is the point of an asset based lender?  From my perspective, asset based lenders should focus more on the asset and less on the borrower.  In my experience, if the asset is one I wouldn't mind owning (at that loan amount), the borrower equity position is good and the borrower has cash in the bank...GREEN LIGHT...credit, income, dti, tax returns, leases are all irrelevant.  I can tell you from experience that not all asset based lenders are the same.  Some don't check credit, some don't ask for tax returns and some don't require an appraisal.

Zachary Beach · Answer

@Joe S. That’s pretty common the people you talk with are the sales people they then have multiple levels and each level the person has to find something wrong to justify their job haha. If they are qualifying the loan based on rent then they basically always want a lease for a year. I always ask for everything up from and for them to to the the underwriter so there are no snags but normally something come up most the time it can be worked out if not if it’s a deal you can’t lose do multiple lenders at once. It forces them to keep the rate or they lose to the other lender you also have lined up. Honestly financing is my least favorite part of real estate because I hate paperwork.

Joe S. · Answer

@Jay Hinrichs

I did fall for upfront money before, but that was over 16 years ago.🥺

Do you all asset based lenders do this?

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