What to do when the Bank is Not Helping

You have heard the stories and maybe you have even lived through them— “the bank won’t call me back” or “they have been reviewing my application for weeks” or “I don’t have time to gather all the documents they want.”

If you're a real estate investor or commercial property owner, then you know that traditional lender financing isn't always the best option. It can be difficult to qualify for a loan, and the process can be slow and expensive. But what alternatives exist for financing real estate?

Private real estate financing provides an alternative to traditional lenders. Non-traditional loans are typically provided by private investors or hard money lenders. These loans often have higher interest rates and fees than traditional loans, but they can be a great option if you can't qualify for a bank loan or if you need to close a deal quickly.

Here are some of the benefits of alternative real estate financing:

-Faster closing times: Private real estate loans can close much faster than traditional loans. This is because they don't have as many requirements and regulations.

-Less documentation: Private real estate lenders and hard money lenders don't require as much documentation as traditional lenders. This can save you time and hassle.

-No credit score requirement: Some alternative real estate lenders don't require a credit score. This can be a great option if you have bad credit.

-No down payment required: Some private real estate lenders don't require a down payment. This can free up your cash for other investments.

Qualifying for a loan is not nearly as easy as it once was, even for first-time homebuyers. In today’s lending environment, you need around a 700+ credit score with ample down payment and cash reserves. You also need to be able to document your income while having a low level of debt. Many investors have trouble documenting all the income they make. Private money lenders do not have the strict approval requirements that regular banks do. If you cannot get approved for a traditional loan, private money may be your best option.

Here are some of the things to consider when choosing an alternative real estate lender:

Fees: There are fees required by private lenders for most alternative real estate loans. Make sure to ask about all the fees before you sign any paperwork.

Terms: The terms of the loan, such as the length of the loan and the repayment schedule, are also important to consider.

Collateral: The property itself is typically the collateral for the loan, which is where the “hard” comes from in Hard Money Lending; these loans are secured by a “hard” asset. Sometimes personal guarantees are also required.

Lender's reputation: It's important to choose a lender with a good reputation. It helps to find someone local, and smaller companies are often easier and more pleasant to work with.

With traditional real estate financing, you need to provide the lender with extensive pieces of documentation. Everything from pay stubs to two months of bank statements are required. This is not necessarily a deal breaker, but collecting these things takes time. At that point, privacy becomes an issue as well. Every time your credit is pulled, your credit score runs the risk of dropping. Additionally, lenders require you to close any loans in your own name. This means that anyone can pick up the newspaper and see who bought the property on the transaction page.

You may have issues in your life where you do not want your real estate business made public. You may be having accounting troubles and not want to close in your name. You could be in the middle of a divorce or a dispute with a business partner. Private money gives you the ability to conduct real estate business without making it public knowledge. For some, this is worth the increased rates and fees.

If you're looking for a way to close more deals and grow your real estate business, private lending and hard money loans are a great alternative to traditional banks.