Category Archives: Stated Income Loan

Understanding the Two Major Types of Commercial Loans

When you begin to explore commercial loans, it can appear that there are an unlimited number of options. But you will find that in reality there are two major types, recourse and non-recourse.

There are a myriad of different terms involved in commercial loans, but none should be as important to the borrower as determining if the loan is recourse or non-recourse. In almost every loan on a commercial property, the main collateral for the loan is the property itself. But commercial property value can and does fluctuate much more rapidly than residential property. In some cases a repossessed property is not worth the remaining balance on the loan. For this reason, lenders want to have additional security in the event of a default on the loan. With a recourse loan, the borrower guarantees full repayment of the loan amount due. In a non-recourse loan the lender agrees to settle for the value of the property as full repayment even if the property value is less than the balance due on the loan.

Borrowers should however temper their desire to protect themselves and their personal financial well-being with a non-recourse loan and the extreme flexibility that can be achieved with a recourse loan. As with most things in life, you get what you pay for, and added features and benefits cost more. So the personal financial protection of the non-recourse loan costs you in the form of higher interest rates. That only makes sense as the lender is assuming a greater risk of losing money if you default on the loan. In addition, lenders can also include stipulations about cash flow and maintenance schedules for the property on a non-recourse loan. This is simply another way that the lender is protecting their investment by ensuring that the building, their collateral, is being well maintained to protect the property value.

When to Choose Recourse Commercial Loans

A recourse loan offers borrowers many more options and flexibilities during the course of the loan as well as a lower interest rate. Because of the added security, lenders are more willing to accommodate borrowers. If you want flexibility to customize the loan structure and the payments then recourse is a good choice. You should also select a recourse loan if there is a chance that you will want to restructure after the closing of the loan. If the property that you are purchasing is under construction or is in a distressed condition, you will most likely also need to use a recourse loan as lenders are not willing to extend the greater risk non-recourse loan to a property with questionable value.

Who Should Select Non-Recourse Commercial Loans

If you are planning on keeping the property you are purchasing for the full term of the loan and do not foresee needing to change the loan or its terms for the lifetime of the loan then a non-recourse loan is a good choice. The non-recourse is also important if you are not willing to or able to risk your personal financial well-being on this business property investment. Understanding the main difference in these two types of loans will allow you to select the financial tool which best meets all of your needs.

Dennis Dahlberg
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177 NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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Benefits – Stated Income Mortgage Can You Get One?

There are a lot of methods to buy a house. In fact you could want a down fee together with a mortgage. There are a lot of several types of mortgages that you may apply for relying in your monetary circumstances.

If in case you have a typical workplace job with documented proof of revenue similar to pay-stubs, W-2’s or Stated Income Loan1099 kinds, you’ll be able to simply apply for a mortgage loan from an area financial institution. Nonetheless if you’re a person that owns a enterprise or has some other different supply of revenue it might be tougher so that you can be accredited for a mortgage loan.

For instance, as a small enterprise proprietor you realize it’s hard to produce a proof of revenue. When securing a loan you might be able to provide tax returns or financial institution deposits. Nonetheless in keeping with most respected banking establishments, supplying tax returns or financial institution deposits are nonetheless not sufficient to show a secure revenue.

Authorities-instituted banks need to know in case your revenue is secure sufficient to repay your loan fee each month. They see your occupation and fluctuating revenue as a “excessive threat” scenario. Attributable to your unsure fluxes in revenue, banks don’t want to be held accountable if it’s a must to default in your mortgage.

Right here’s the dilemma: You are an actual property agent and see a dream of a home that you just want to purchase. You have solely been in enterprise a bit of over a 12 months. Due to this fact you can’t even provide the frequent 2 years price of tax returns. You have made common deposits to a checking account and hope that the deposits shall be sufficient to be accredited for a loan. Sadly the mortgage choices obtainable at your native banks are stringent about checking proof of revenue, and won’t settle for any financial institution statements. What do you do?

This example doesn’t sound honest, however you continue to have an opportunity to show your dream residence right into a actuality. Neglect typical banks for the second and apply for a acknowledged revenue mortgage loan as a substitute.

What’s a acknowledged revenue loan?

A stated income mortgage loan is a house loan that requires no proof of revenue apart from the revenue you formally declare or state. The revenue you declare is the revenue you’ve got in keeping with the mortgage lender. And the quantity of money you obtain shall be based mostly on the quantity of revenue that’s acknowledged.

A acknowledged revenue loan is also called another or no-doc loan, which in the end means Finding the Stated Income Loan“no doc”. Sure “no paperwork” are wanted, as within the official paperwork sometimes used to show revenue at a banking establishment.

That is good for debtors which have the power to repay a loan however are in a sophisticated monetary dilemma – they’re self-employed, they’re enterprise homeowners, they’re actual instate/funding brokers, and so forth.

In fact it’s best to use for a acknowledged revenue mortgage if you realize you’ll be able to repay the loan inside its meant time-frame. Contemplating most people that apply for a acknowledged revenue loan are merely unable to produce proof of revenue, this shouldn’t be an issue. Nonetheless it’s suggested to solely declare the quantity of revenue closest to what you’ve made previously. Should you can not estimate previous revenue, make an informed assumption of future revenue.

Are you self-employed and having trouble getting approved for a home loan?

Take into account making use of for a stated income mortgage loan.

Decide up the cellphone and speak to Dennis at Degree 4 Funding:  623-582-4444. As the house loan specialists in Arizona, we offers you the recommendation it’s essential to get accredited.

Degree 4 Funding LLC

23335 N 18th Drive Suite 120

Phoenix AZ 85027