Why You Can’t Rely On Traditional Mortgage Lenders To Flip Houses

The data shows that real estate investors still can’t rely on traditional mortgage lenders and banks for their financing. The good news is that there are alternatives.
The latest mortgage lending statistics from Ellie Mae and National Mortgage News show it hasn’t gotten much better for real estate investors over the past year. These are just some of the challenges that demand investors use alternative financing sources for their house flip and wholesale deals.
Time
The time it took to close a purchase loan grew by almost 10 days last year, to nearly 50 days on average. When more sellers and agents don’t want to sign a contract for more than 30 or 45 days, this type of financing just doesn’t cut it.
Credit Scores
If you do use your own credit as a real estate investor, you know that the system is notoriously rigged to penalize you the more you do. Instead of getting extra credit for experience they punish you for having taken out more mortgages. 58% of completed loans still have credit scores of 700 to 799. 71% have credit scores above 700. Taking out one loan on your personal credit can knock you off of that tier and derail your plans to scale.
Loan Costs
Conventional loan costs are still high. Even despite all the technology which is making it easier to obtain and process loans. A lot of it is made up of miscellaneous third party fees and mandatory purchases to get the loan.
No Common Sense
There doesn’t seem to be any more common sense in underwriting mortgage loans. It’s one of the downsides of artificial intelligence and going too big too fast. Just between Google and Facebook lenders should have all the data they need to approve more loans. They can even tell if you made it to work today or called in sick with a hangover.
Completion Rates
Far fewer mortgage loan applications may make it to closing than you think. Last year barely 65% of VA home loans, and 70% of all mortgage loan applications actually made it to closing. Those are not good odds to build a business on, have your income rely on, or to gamble deposits on. If you put down a $2,500 deposit on average, you’re already losing $7,500 to over $10,000 for every 10 properties you put under contract. That has to be deducted from any profits you do make on other deals.
A Better Way To Fund Your Mortgage Deals
Hard money is an alternative. Though still often an expensive one which is far more like dealing with a traditional bank than it used to be. Private lenders can be an option, but can be a huge distraction from just making money on real estate deals.
Transactional funding is different. No credit score requirements, no losing the deal over an appraisal and funding available in hours. Try it out on your next deal.
Tags: transactional funding, private lenders, hard money, mortgage lending, wholesale, house flips, real estate investors