Category: EB Mortgage - page 2

With careful planning and a strategic approach, DSCR loans can pave the way for a prosperous and sustainable venture into the world of real estate investment. Read on to learn more about Debt Service Coverage Ratio (DSCR) loans.

Navigating Cash Flow Concerns in Real Estate Investments

Investing in real estate can be both exciting and daunting, especially when considering the financial implications. Traditional mortgage products often require a detailed history of personal income, which can be a significant hurdle for investors who may not have a steady income stream but possess substantial investment potential. This is where DSCR loans come into play, offering a unique solution for aspiring real estate investors concerned about cash flow issues.

Understanding DSCR Loans: A Key to Real Estate Investment

DSCR loans are designed specifically for investment properties and focus on the cash flow generated by the property itself, rather than the investor’s personal income. The key metric here is the DSCR, a ratio that compares the property’s annual rental income to the annual mortgage debt service (including principal, interest, taxes, insurance, and homeowner association fees, if applicable). A DSCR of 1 means the property’s income covers all its annual debt, while a higher ratio indicates a surplus. Lenders typically look for a DSCR of 1.25 or more, providing a cushion against potential vacancies or unexpected expenses.

The Advantages of DSCR Loans for Real Estate Investors

DSCR loans offer several advantages. First, they allow investors to qualify based on the property’s income potential, bypassing the traditional income verification process. This is particularly beneficial for self-employed individuals or those with variable incomes. Additionally, these loans often come with the option for interest-only payments, further easing the initial cash flow burden. This flexibility can enable investors to scale their portfolios more rapidly.

Making an Informed Decision: Is a DSCR Loan Right for You?

While DSCR loans offer a path to investment for those concerned about cash flow, it’s essential to approach them with a clear understanding of the risks and benefits. These loans might carry higher interest rates than traditional mortgages, reflecting the lender’s increased risk. Additionally, investors should have a solid plan for managing the property, ensuring it generates sufficient rental income to cover the loan and other expenses.

For those looking to dive into real estate investment but worried about cash flow constraints, DSCR loans can be a game-changer. By focusing on the income-generating potential of the property rather than the investor’s personal income, these loans open doors to investment opportunities that might otherwise be inaccessible. With thoughtful preparation and a tactical approach, DSCR loans can lay the foundation for a successful and enduring journey in real estate investment.

Looking for a mortgage solution that fits your needs; contact or call (616) 228-8797 EB Mortgage today!

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: www.cpsmi.com

In the dynamic world of commercial real estate financing, understanding the myriad economic factors influencing commercial property loans can be complicated, to say the least. Commercial lending is not just figures on a balance sheet; they are deeply affected by various macro- and microeconomic elements. Numerous factors play pivotal roles, from the overarching health of the economy to the specific conditions in the real estate market. In this article, we briefly review the key economic influences, such as interest rates, economic growth, inflation, and more, that shape the world of commercial property lending.

Economic Growth: The overall health of the economy impacts commercial property loans. In a growing economy, businesses expand, increasing the demand for commercial properties and, consequently, for loans. Conversely, in a downturn, loan demand may decrease.

Real Estate Market Conditions: The supply and demand dynamics in the real estate market influence commercial property values and the perceived risk of lending for such projects.

Fluctuating Interest Rates: Are among the mostsignificant factors affecting commercial property loans. Higher interest rates can lead to increased borrowing costs, influencing both the demand for loans and the feasibility of commercial real estate projects.

• Impact on Real Estate: High-interest rates can significantly affect commercial real estate, especially for owners with near-term debt maturities or investors looking to develop or acquire properties​​.
• Lending and Investment Strategies: Rising interest rates can lead to a reevaluation of deal economics, with lenders becoming cautious about the impact on debt service coverage ratios​.

Stabilizing Inflation: High inflation can lead to higher interest rates, which can increase the cost of borrowing. It can also affect the value of properties and rental incomes, impacting the feasibility of commercial real estate investments.

• Construction and Operating Costs: Inflation directly impacts property construction and operating costs. Costs driven by supply chain disruptions and increased wages due to worker shortages are significant factors​​.
• Utilities and Insurance: Costs for utilities and property insurance are also likely to remain high, partly due to climate change and geopolitical factors​​.

Consumer Confidence and Recession: The fear of a recession can impact consumer spending and investment decisions. Additionally, the level of consumer confidence significantly influences the retail and hospitality sectors, affecting both the demand for and value of these properties.

Global Economic Trends: In today’s interconnected world, global economic trends can have a significant impact on local economies and, by extension, on commercial property loans.

Government Policies: Regulatory policies, including zoning laws, tax policies, and real estate regulations, can impact commercial property investment and lending. For instance, favorable tax treatment for certain types of properties can stimulate demand for loans.

Employment Rates: Employment levels in an area can affect the demand for commercial real estate. Higher employment usually leads to increased demand for office and retail spaces, influencing the number of commercial property loans.

Lender Confidence and Credit Availability: Economic factors can affect lenders’ confidence and their willingness to finance commercial real estate projects. Financial stability tends to make lenders more willing to issue loans, while instability can make them more cautious. The broader availability of credit in the financial system can impact how easily borrowers can secure commercial property loans.

How the market responds is based on sector-specific impacts. Various commercial property sectors respond differently to these economic factors. For example, hospitality and retail might be cushioned against a downturn due to low unemployment rates and high job openings​​. Understanding these factors is crucial for investors, developers, and lenders in making informed decisions about commercial property investments and loans.

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: www.cpsmi.com

When comparing commercial property financing options between banks and private lenders, it’s important to consider the pros and cons of each. It’s also imperative to take into effect how economic factors like interest rates, market trends, and economic cycles can influence the availability and terms of these loans. Read on to discover more.

Basics of Bank Lending

• Lower Interest Rates: Banks are generally able to offer lower interest rates than private lenders​ because they serve larger populations​.
• Regulation and Standards: Banks are subject to state and federal regulations, making them more stringent in their lending criteria. This means they often have higher lending standards, making it difficult for borrowers with less-than-ideal financial histories to qualify​​.
• Credit and Financial History: Banks tend to focus on the borrower’s credit and documented income sources, making it challenging for self-employed borrowers to qualify​​.

Basics of Private Lending

• Flexible and Fast Lending: Private lenders are known for their flexibility and quick processing. They are a go-to option in urgent financing situations​​.
• Higher Interest Rates and Costs: Private lenders sometimes charge higher interest rates and have other costs like legal fees, which are eventually passed over to the borrower​​.
• Customizable and Less Rigid: Private lenders offer more customizability in loan terms and are less rigid in their qualifying standards, such as credit scores and debt-to-income levels​​.
• Creative and Investigative Lending Standards: Private lenders are often more creative in their loan processing standards and may overlook certain background flaws if the borrower can provide a reasonable explanation​​.

Choosing the Right Finance Lender

If you have a solid, strong financial history, good credit, and proof of income, and you’re not in a hurry to obtain financing, then a bank may be a better choice due to its lower rates. However, if you have a more challenging financial history and your need for funds is more urgent, a private lender might be a more suitable option. The right financing choice ultimately depends on your unique circumstances and financial goals.

Take Economic Factors into Consideration

The choice between banks and private lenders for commercial property financing depends on various factors, such as the borrower’s financial history, the type of property, and the urgency of financing needs. Additionally, economic factors like interest rates, inflation, and the risk of recession can significantly influence the terms and availability of commercial property loans, with each sector responding differently to these macroeconomic variables. Choosing the right financing requires carefully evaluating your financial circumstances and considering the broader economic conditions.

We make obtaining commercial loans easy. Contact EB Mortgage today to learn more!

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: www.cpsmi.com

Mortgage brokers are intermediaries between real estate purchasers and loan agencies. They help borrowers find a lender with the best terms and rates based on their monetary requirements. Experienced mortgage brokers can save a borrower time, effort, and money. They also have access to more lenders. Working with a skilled and knowledgeable mortgage broker can help you obtain the appropriate loan for your needs at the best rates.

What is the Difference Between a Mortgage Broker, Lender, and a Loan Officer?

Mortgage Broker

Mortgage brokers are oriented toward completing real estate transactions as a third-party mediator between the borrower and the lender. They collect in-depth information from potential borrowers to pass along to potential lenders to find the best loan for their clients. Once a broker finds the perfect lender, they collect the necessary paperwork to secure the loan for both parties. 

Lender

A lender, which could be a bank, credit union, or another financial institution, provides funds for real estate transactions. The borrower repays these funds along with a predetermined interest over a set period. While home buyers can approach lenders directly for a loan, some lenders only work through mortgage brokers. Hence, if a borrower prefers a lender, they would need to engage a mortgage broker.

Loan Officer

A loan officer is an employee of a lender who assists borrowers with the loan process. They provide information about the lender’s loan offerings, answer queries, help borrowers get pre-qualified, and support the application process. They can also advocate for borrowers during the loan closing process.

How to Find a Mortgage Broker You Can Trust 

• Ask friends, neighbors, and relatives for referrals 
• Look at online reviews 
• Meet with prospective brokers to see how they can help you 
• Ask about their experience, fees, and how they are paid 
• Find out whether they can help you with your specific financial circumstances

What Are the Advantages of Using a Mortgage Broker?  

A Broker Saves You Time

Mortgage brokers have deep connections with a variety of lenders nationwide. Essentially, they can find you a lender with the best rates and terms, and they can steer you away from lenders with challenging payment terms buried in their mortgage contracts. 

A Broker Has Better Access

Accessing some lenders directly for a retail mortgage may not be possible, as they may choose to work exclusively with mortgage brokers, depending on them to introduce suitable clients. Additionally, since brokers bring in a substantial number of borrowers, lenders are more apt to offer them lower rates in return.

A Broker May Reduce Fees

Remember to consider the small details, such as the additional fees associated with a new mortgage. These can include origination fees, application fees, and appraisal fees. Often, mortgage brokers can request lenders to eliminate some or all of these charges, potentially resulting in considerable savings for the borrower.

Working with a mortgage broker could be advantageous if you’re seeking a home loan, have less than ideal credit, operate your own business, or desire guidance through the mortgage process. Additionally, they can often assist in obtaining loans with lower interest rates compared to most commercial loans available to the general public.

For nationwide specialty lending, refinancing, or purchasing your first home, EB Mortgage is your source for low wholesale rates – call today to learn more!

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Debt Service Coverage Ratio (DSCR) mortgages are intended to help real estate investors and property owners finance their properties with flexibility and control. Traditional mortgages focus mainly on the borrower’s credit score and income, while DSCR mortgages consider the property’s cash flow to determine the borrower’s repayment ability.

Based on the property’s actual income and expenses, borrowers can obtain financing for the property. This enables those with lower credit scores or irregular revenue to qualify for a loan if the property generates enough cash flow to make the payments. 

The DSCR is the ratio between an investment’s net operating income and total debt service. It is calculated in real estate to determine whether a property has adequate cash flow to cover the mortgage payments. The higher the DSCR, the better the ratio. Anything over 1.25 is considered a good DSCR. 

DSCR loans do not have the same requirements as conventional mortgages, but there are still guidelines investors must meet to qualify for a loan. Though government entities do not back these mortgages and there is no standard, most mortgage companies require the following:

• DSCR should be between 1 and 1.5 to qualify. 
• Credit score should be at least 620.
• Down payment is usually 20%.
• Cash reserves need to cover at least six months of payments.
• Maximum DSCR loans are typically $5 million.
• Prepayment penalties often apply. 
• Property eligibility varies between companies but is typically one to five units.

Some advantages of DSCR loans include the following: 

• Eligibility requirements are different.
• No loan limit.
• Reduced down payments.
• Loan amounts up to $5 million.
• Unlimited cash-out.
• Swift closing.
• No employment verification. 

DSCR loans allow borrowers to qualify for home loans without using their tax returns. Real estate investors, or borrowers, can avoid high rates, elevated private loans, long approval processes, and strict lending standards with DSCR loans. 

Stop searching for a DSCR loan. Contact the experts at EB Mortgage today to learn how we can help.

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today! 

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Though prequalified and preapproved sound like similar terms, they actually mean different things in the mortgage industry, depending on the creditor and the type of loan or credit. Many creditors use the terms interchangeably, but they are, in fact, different.

Despite whether the buyer is trying to get prequalified or preapproved, a creditor must do an initial assessment to determine whether they will get approved for a new loan. The creditor will offer varying interest rates, terms, and loan amounts based on that number. Offers based on prequalifications are less stable than preapproved ones. Neither prequalification nor preapproval guarantees that the borrower will qualify for a loan or credit card.

Preapproved
Preapproval occurs once the borrower is accepted for a loan or credit card, depending on the process. Prescreened offers usually indicate that the potential borrower is on a credit reporting agency list of consumers who meet specific criteria. Sometimes, the lender can decide to decline the borrower’s credit application after reviewing the credit report, scores, and information provided to them. Preapproval does not mean the potential borrower has secured any loan or credit card. When it comes to mortgages or vehicles, a complex application and review process can occur, involving tax returns, proof of income, bank statements, and a credit check. Most mortgage brokers or automobile lenders will review the documents and offer a loan in the form of a preapproval letter, good for several months.

Prequalified
After the borrower submits an application, prequalification comes when the creditor reviews the borrower’s credit to see whether they can qualify for a loan or credit card. Requirements vary but might involve sharing information about the borrower’s financial situation, annual income, housing payments, and savings accounts. Soft inquiries will hit the borrower’s credit, but this type does not affect credit scores. Official documents might be mandatory if a complete review process is done, leading to a hard credit inquiry, which can lower credit scores. While getting prequalified doesn’t guarantee approval, it’s still a good idea to start with a soft inquiry to see whether the hard inquiry will be necessary down the road.

If you are looking to get a mortgage, you’ve come to the right place. Contact the experts at EB Mortgage to learn how we can help save money!

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Higher mortgage rates and fees are now increased for homebuyers with good credit ratings thanks to a novel governmental rule to subsidize other potential homebuyers with lower credit scores.

As part of the Federal Housing Finance Agency’s push toward affordable housing, the fees will affect mortgages secured in private banks across the United States. 

Homebuyers with credit scores of 680 or more owe roughly $40 more per month based on a $400,000 home loan. Those with down payments of 15- to 20 percent will also see higher fees.

Lenders and real estate agents anticipate the new rule to complicate things for homebuyers with high credit scores and those seeking to refinance.

Ian Wright, a senior loan officer at Bay Equity Home Loans said, “The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well. It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing. It will cause customer-service issues for lenders and individual loan officers when a consumer won’t understand why their interest rate and fees suddenly changed. I am all for the first-time buyer having a chance to get into the market, but it’s clear these decisions aren’t being made by folks that understand the entire mortgage process.” 

A series of Federal Reserve interest rate increases have forced the mortgage rate to over six percent, double where it was in 2022. To deflate inflation, which hit a four-decade high of nine percent in the summer of 2022, the Federal Reserve has swiftly raised rates.

Kenny Parcell, president of the National Association of Realtors, said, “In the wake of a three-percentage-point increase in mortgage rates, now is not the time to raise fees on homebuyers.”

Homeowners with dodgier credit ratings and minimal down payments will qualify for better mortgages along with discounted fees. 

The Federal Housing Finance Agency Director Sandra Thompson said, “The fee changes will increase pricing support for purchase borrowers limited ability by income or by wealth.” She goes on to say that the changes are minimal, and the shift will guarantee market stability. 

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Rental loans, or Debt Service Coverage Ratio (DSCR) loans, are tapered to rental investment properties. The DSCR metric evaluates the rental income, operating expenses, and mortgage expenses to formulate a dollar value. 

Commercial lenders (private lenders, banks, etc.) typically require a minimum DSCR to qualify for a Loan-to-Value (LTV). DSCR loans provide a personal guarantee from the borrower based on whether they can prove rental investing experience, show an acceptable credit score and personal net worth, and whether the subject property is DSCR-eligible. 

Rental loans are usually 30-year terms but can be adjusted if necessary. Amortization is generally 30 years, but five, seven, or 10-year interest-only periods are possible. During this time, annual or semi-annual adjustable rate and amortization begin at the end of the interest-only period during the entire 30-year term. 

The different types of rental loans include: 

• Purchase 
• Cash Out Refinance 
• Rate and Term Refinance
• Portfolio (two or more properties) 
• Multifamily (five or more units) 

Any rental property purchaser can use a DSCR loan. Rental loans are typically utilized by real estate investors who do not have a W2 (salaried employment), do not qualify for a conventional mortgage, and do not have tax returns available. 

DSCR loans can be refinanced, but there might be a prepayment penalty on the loan that will alter the refinance cost. Depending on the circumstances, it might be more advisable to do a rate and term refinance instead of a cash-out refinance.

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EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/