Investing in real-estate comes with many advantages, the most attractive one being that an investor is able to enjoy a steady flow of income, which is necessary to attain financial freedom. However, it can be challenging for many investors to be able to put together money ranging in the hundreds of thousands to millions. The large amount of money involved is what makes mortgages a necessity. If you are an Orange County investor or you are considering investing in the county’s real estate, and you are in need of financing, consider Money Lender Loans for reliable and affordable mortgage loans.
What is a Mortgage?
A mortgage is a type of loan that is used purely for real-estate financing. A buyer who wants to invest in a real estate property can acquire a mortgage as a way to raise money to buy that property. An existing real-estate investor can also acquire a mortgage to raise money for any other need while putting up their investment as collateral for the loan.
Real-estate loans are usually secured. In most cases, mortgage lenders will use the borrower's property to secure the loan through a legal process called origination. With that process in place, the lender is legally able to repossess the property in the event the borrower has been unable to repay the mortgage. The lender can sell the property through repossession or foreclosure to be able to recover all the amount of money he/she had given the investor in a loan.
The term Mortgage was borrowed from a French legal term that means a death pledge. This definition basically means that after acquiring a mortgage, the pledge made by the borrower ends only when he/she fulfills their obligation. Otherwise, the property is repossessed by the lender.
Should you Choose Mortgage or Cash?
Any form of credit is not good today. The rate at which people are defaulting to pay loans is increasing, explaining why so many people have bad credit scores and are unable to access better loans. That is also why many people would prefer to buy a home with cash other than acquiring a massive debt that will take them years to repay.
Buying a real estate property with cash is a smart choice for any person who wants to enjoy good financial health. However, there are other things that come into play when one is contemplating buying a home with cash or by financing it.
The use of cash eliminates any need for a buyer to pay high-interest rates that are characterized by real-estate loans. There are, in fact, so many costs that are associated with mortgages, including closing costs, which should be paid on top of the actual amount of loan and the interests. Think of appraisal fees, mortgage origination fees and other fees that are charged by different loan lenders.
Buying a home in cash is not only attractive to buyers but to sellers as well. There are so many home buyers who back out of the deal even before the sale goes through, for instance, if the financing application is not approved. For a seller, chances of making a successful sale are higher when a buyer is paying in cash. But in this case, the seller will not be able to make a kill at the end of the business because a cash buyer will always obtain the property at a lower price.
Mortgages are commonly used than cash for so many reasons. A financial adviser will advise a home buyer not to tie up so much money in a single investment when they can invest in several other projects for huge returns in the future. For a person in business, using all the cash to buy a property will limit their options in case another opportunity comes up. Example, if the property needs more money in renovations and repairs, it might take time before the investor raises more money and even a long time before they can sell it for a profit.
Again, for a person in business, you need to accumulate more money for all the investments you want to make in the real-estate business. This could take more time than you need if you are only going to be buying properties with cash.
Types of Real Estate Loan Lenders
To get a mortgage, an investor needs to have a lender in mind. There are so many lenders on the market today, and so, it can be a little daunting finding the right one for your needs. It is important to take time to understand the different types of mortgage lenders so you can comfortably pick out your choice. Before that, think about the type of real-estate loan you are interested in. Here are the main types of real estate loan lenders available today:
Mortgage lenders are financial institutions that offer and underwrite real-estate loans. It could be a mortgage bank too, with specific guidelines through which a mortgage borrower will have to go through to qualify for the loan. A mortgage lender will consider the creditworthiness of a borrower as well as their ability to reimburse back the money. There are other set terms for the loans issued including repayment schedule, interest rates and other important aspects of the mortgage.
Under mortgage lenders are mortgage bankers, retail lenders, direct lenders, portfolio lenders, wholesale lenders, warehouse lenders, correspondent lenders and hard money lenders among others.
Mortgage bankers are the most popular of all real-estate loan lenders. They could be a retail lender or an ordinary bank that is offering mortgages to real-estate investors. To get money to give out, mortgage bankers borrow money from warehouse lenders on short-term interest rates so as to fund all the mortgages they give to their clients.
Retail lenders are those that issue out mortgages to investors directly. They can be banks, mortgage banks or credit unions. A retail lender will provide other services to its consumers, including personal loans, savings and checking accounts and car loans.
Direct lenders use their own money to give out loans to investors. Mortgage banks work this way. If the amount of money they have is insufficient, they can borrow funds elsewhere, to help an investor acquire a property. Direct lenders specialize only on home loans, and so, are more flexible in terms of qualifying alternatives and guidelines for the benefit of a borrower.
A portfolio lender will also use his/her own money to fund a borrower’s mortgage. The only difference from other lenders is that a portfolio lender will set their own terms and guidelines, which a borrower must adhere to. Their guidelines are never in line with other lenders’ or with the demands of borrowers.
Wholesale lenders are usually big financial organizations that offer loans to mortgage brokers, credit unions and other banks. They do not work straight with investors, but they fund as well as service real-estate loans. If you apply for a loan through a mortgage broker, it is the name of the wholesale lender that will appear on the loan documents. This lender determines the terms and conditions of the home loans he gives out.
Hard money lenders should only come to your mind if you are unable to obtain a loan from any of the above lenders. These types of loan lenders usually operate a private business, though they can act individually. The most important thing is that they have a significant amount of money, which they use to fund investors. Their loans are payable within a few years and so, can only appeal to quick investors who buy, repair/renovate homes and then sell them off quickly for a good profit.
A Mortgage Broker
A mortgage broker is usually an intermediary working between mortgage borrowers and lenders. A broker will simply link a borrower to a lender and vice versa. Unlike the lender, the broker will have no control over the borrowing terms and conditions; he/she will only provide the borrower with the terms that the lender has already set.
Mortgage brokers are usually licensed and professionally trained to help mortgage borrowers with their application forms and other required documents. They are usually well informed on mortgage matters to offer solid advice to real-estate loan applicants, which help in increasing a loan applicant’s chances of approval.
Some mortgage brokers work for one independent lending company to help the company connect to potential mortgage applicants, while others work independently to help borrowers connect to loan lenders who meet their needs and requirements.
Brokers are usually paid by lending companies. After a certain loan closes, a broker can confidently ask for a commission from the loan lender. There are instances where the borrower pays a little commission to the broker. All this is important to know beforehand, so you can be prepared to spend more money on broker fees.
Should I Choose a Lender or Broker?
It is important to decide whether you are going to work with a broker or mortgage lender. Most mortgage brokers are those that work with a wide range of different types of creditors. In order to decide whether or not you will work with a broker, it is important to find out the kinds of products, terms, and conditions that those lenders are offering.
Always bear in mind that there are direct lenders too, and brokers will not have access to the services of these lenders. Take some time off to consider the advantages of working with a direct lender, the disadvantages, and then compare that with the services of a mortgage broker.
Another important consideration is that most brokers will charge an upfront fee or commission for their services. Some brokers will charge this commission on the lenders they are representing, while others will require the borrower to pay.
A direct mortgage lender will charge a higher interest rate as compared to what you might get when working with a broker. Brokers are able to negotiate for a reduced rate to the benefit of their clients (borrowers).
Do not forget that mortgage brokers are there to simplify the process for you. A broker will shop around on your behalf, looking through different mortgage lenders, to pick out the right lender that matches your needs. This will save so much of your effort and time. You only need to let the broker know exactly what type of mortgage you are in need of; it could be a mortgage with a little down payment or a good rate with your not-so-good credit score or a generally lower rate. With the right mortgage broker by your side, it is possible and easy to find a real-estate loan that has been tailored to your needs.
An experienced mortgage broker has already established excellent relationships with many loan lenders who are willing to offer them better terms for their clients. Having such a connection is good especially if you need favorable loan terms and a flexible repayment period.
Choosing a Mortgage Loan Lender
Even with the above-mentioned advantages, the kind of loan lender you end up working with will determine how easy or otherwise your loan repayment process will be. Note that as soon as you have signed the papers, your broker will not have any say on how the loan will be dealt with, how long it will take to get the loan and whether or not you will get that loan. This brings us to direct real-estate loan lenders.
If you want to speed things up and be sure to get the loan you are applying for at the exact time you need it, working directly with the loan lender is an advantage. But how do you find a good lender? For a lot of people, the lender that is closest to you (your home or office) is the right one to work with. There is more that should be considered when looking for a good mortgage lender than how close or far the lender is. There are important qualities you should look out for, to be sure that you will have a wonderful experience working with that particular lender:
A lender offering personalized attention
There is a lot that is involved in the mortgage lending business that can be confusing and overwhelming for a borrower. That is why it is important to work with a lender who will be there, to answer all the questions you have and to walk you through the process for a swift process. Again, it helps a lot to know that the lender will always be there when you need them. This gives you peace of mind as you carry on with your business.
An experienced lender
Experience comes with deeper knowledge about the loan lending process as well as the entire real estate industry. An experienced loan lender will, first of all, be able to explain to you the exact process the lending will take and how soon you will be able to get the funding. You could also benefit from great advice, from the wealth of information the lender has gathered through the many years he/she has been in operation. An experienced lender will also be able to handle your personal needs better.
The reputation of a loan lender is always important. If a mortgage lender has several previous clients who are saying good things about them, this automatically means that you will have a wonderful experience as well. Many consumers today provide their feedback about the services they utilize online and so, it is very easy to find out what people have to say about a loan lender you are interested in. There is Better Business Bureau as well, from where you can access any complaints against a certain loan lender if they have registered with the service.
Do I Qualify for a Mortgage?
Mortgages are popular but they are never a sure thing. Not everyone who applies for a mortgage loan gets it in the end. There are several factors that we consider before approving your real-estate loan application:
If your credit rating is low, it means that the loan lender is not sure whether you will be able to repay back the loan or not, and this can disqualify you for a number of loans including mortgages.
You may not be able to afford a mortgage if your income is limited. A lender needs to be sure that you will be able to make the down payment and all the monthly payments as per the agreement.
Find a Mortgage Lender Near Me
Investing in the real-estate business comes with a myriad of advantages. However, you need to raise enough cash to buy a property or find a good mortgage lender. While there are so many real-estate loan lenders out on the market, making the right choice will determine the experience you get while acquiring the property and repaying the loan. If you are seeking a mortgage in Orange County, California, call our Orange County mortgage loan officer at 949-409-4372 for a more personalized experience with the Money Lender Loans.