I thought you may like an inside look at what’s happening in the investor lending market. Investor lending is currently in a state of flux. That makes everyone nervous, and frankly, it’s driving us a little nuts.
Unfortunately, we’re only getting bits and pieces of information. Everyone is reluctant to tell us where their funding is going or what the new requirements will be.
Here are some specific examples we’ve seen recently.
- Houses with demo finished down to bare studs are suddenly a problem, whereas a few months ago it was not. But, it may not be a problem going forward.
- An appraisal on a high valued property over ½ completed took 5 months to get. The loan was rejected the by lender when it was finally received. I think if the appraisal had come in quickly, it would not have been a problem, see #1.
- Several BPOs have come in much lower than expected. We’ve seen two causes for this
- the agent specifically choosing the lowest priced sales instead of truly comparable sales
- the agent chose comps from a lower priced neighborhoods nearby, and even properties with fewer bedrooms.
- Getting status reports and timelines is a challenge. Some of the lenders seem to be adopting a “black hole” mentality, whereas the only information we get is “we’re working on it.” This is especially true on the rental side.
Rental loans are taking a much longer time to process than before.
- Low priced rentals (Loans under $125,000) are taking even longer. Yes, I know $125,000 is high for rental in the Midwest.
- Loans under 75,000 are going to be harder to get approved.
- Timelines have been changed from “30 days” to “30 business days”. One word, but that adds two weeks to the process.
- One lender simply shut down their rental program.
- Others are increasing their minimum loan amounts
- One major buyer of mortgages just raised the minimum amount for loans they buy to $75,000
- Two lenders increased their refi seasoning to 12 months. That still leaves a couple lenders at 3 and 6 months to do a cash out refi.
- Overall we’re still getting reasonable rates and terms for hard money loans. 4pts & 12% average, less for those with lots of experience.
- Expect more scrutiny on the rehab side of the deal.
- “As is” value at the time of purchase is now a factor with most lenders
- 20% is still the norm for your down payment. The right deals can be done with only 10% down on the purchase.
- Plan on 6 weeks for a loan. If/When that changes, I will let you know.
- Property value must be at least $50,000.
- There are only a couple lenders available that will do rental loans for under $75,000.
- Loans under $75,000 have minimum fees which will make the costs look higher compared to the loan amount.
Investor lending requirements will continuously change. We’ll keep you updated.