Frequently Asked Questions - Buyers Arrange Financing
FAQs - Buyers Arrange Financing
Why do I need to do this before looking?
Listing agents will throw your offer in the garbage unless your offer is attached to proof of funds. No exceptions. Proof of funds is either a recent bank statement or a lending approval letter. You could be the Dali Lama with a brief case full of Benjamins and they will not look at your offer. Getting an approval letter from a lending institution can take weeks and by the time you get that letter, there is 95% change your property is no longer available. If you are paying cash, you just need to show a screen shot of your bank statement OR get a statement of funds from your banking institution.
Should I get a loan or pay cash?
This is a very complex answer and corresponds to your philosophy of building wealth. Leveraging money can help you build wealth faster. However, there are obvious ramifications of getting a loan: you are on the hook to make payments on time. Many American's got themselves in a pickle by making commitments that depended on their income. If your future income is sketchy, we recommend that you get a loan that is extremely modest if at all. The worst mistake you can make is to tie up all your credit availability into your primary home.
Isn't cash king in the foreclosure market?
Sometimes. If the property is owned by Wells Fargo or Bank of America, your cash is not king. If a competing offer has a Bank of America loan letter and you have cash, you will be beaten by the buyer who has the loan. The reason is because Bank of America makes more money on the loan that the selling of the asset. The same is true with Wells Fargo. Your agent will assist you in guiding you to the houses that give your financing ability the most leverage.
Who offers the best lending rates?
Generally Bank of America, Wells Fargo and Chase are best unless you are a local who belongs to a credit union. If you you have a job (get a yearly W-2) you should try Bank of America, Wells Fargo or Chase. If you are self employed and/or have a dubious credit score, you will have to get paper from a mortgage broker. Our preferred mortgage professionals
are listed on our site so you can get more detailed rates and information from them.
What if my income / credit is dubious?
Hard money is expensive. Generally these are at about 5 points up front and 10% interest only with a principal balloon at the end of 3 years. These "bridge" loans are not recommended unless you are very experienced and/or have a large lump sum coming due. The recommended path to take is to pay cash for something much more modest and then move up over time.
How about getting an owner/carry property?
There are a few available and many of these are available from our pool of existing investors. HOWEVER, you are paying a premium on the purchase and paying a premium interest rate. Since there are so few available, this type of transaction rarely occurs.