Banks and Mortgage Companies
Conventional Loans Through a Traditional Mortgage Lender
What Is A Bank Or Mortgage Company Loan?
When it comes to applying for a loan, many people’s first thoughts are a conventional mortgage provided by a traditional bank as a source of financing. Almost all banks and mortgage companies eventually sell their loans to Fannie Mae and Freddie Mac, which makes their stipulations for investors much stricter. Some banks are portfolio lenders, meaning that they provide the capital out of their own funds, thereby giving them a little bit more flexibility and freedom to make their own terms and conditions for borrowers, but ultimately they face additional regulations and oversight.
What Can Banks and Mortgage Companies Offer Real Estate Investors?
For borrowers just starting out in the real estate investing business, the lower rates that banks tend to offer may make this type of loan option more attractive. However, with these lower rates come many more regulations that will affect a borrower’s ability to apply and be approved for these loans.
What Are The Typical Terms Of A Conventional Loan?
Unlike hard money lenders or private money lenders, banks are notorious for being more restrictive with their lending criteria, which can make things difficult for some investors. Bank loans will usually require a higher level of credit, an extensive amount of documents and paperwork, can take upwards of 60 days or more to close a deal, and will ask for more available cash and money down. Additionally, because banks will ask for more income verification, self-employed investors may encounter some complications when applying for their loan.
What Obstacles May Investors Face With A Conventional Loan?
In addition to the previously mentioned lending conditions that banks usually follow, investors who are looking to expand their businesses by doing multiple deals will find a bank loan difficult to meet their needs. The reason being: banks make simultaneous property deals difficult for investors and due to guidelines, anything beyond ten properties is almost impossible to obtain a loan.