August 2022 - DG Pinnacle Funding LLC
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August 2022

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Benefits of Soft Money Loans for Investment Properties

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Benefits of Soft Money Loans for Investment Properties

Soft money loans are the perfect type of real estate investment loan for a variety of reasons as it primarily serves as an in between option for hard money loans and traditional money loans. Generally speaking, soft money loans are term loans, meaning they cover financing for a set period of time, offered by private lenders that typically have low interest rates, high LTV ratios, service long-term projects (5-30 years), and can be approved as quickly as a hard money loan. They are the primary alternative option in private lending when the hard money option is too expensive for investors and a reasonable option when you can’t get a traditional bank loan. Additionally, the fast approval rate of private lending allows for soft money loans to be competitively appealing against traditional bank loans as those can take months to process and approval. So, why should you get a soft money loan for your real estate investment project? What are its benefits and what can it be used for?

First Benefit

First, there is the LTV ratio. What is an LTV ratio? An LTV ratio is the Loan-to-Value ratio, and it is calculated by dividing the amount of money borrowed by the value of the property’s appraisal. Both the value of the property and the money borrowed can fluctuate, meaning the LTV can also fluctuate. Also, the higher the LTV, the less the borrower is required to put down. With soft money loans, the maximum LTV is higher than most traditional loans. To be specific, soft money loans tend to have a maximum LTV of 85% while traditional loans have a maximum LTV of 70%.

Second Benefit

The second benefit and probably the largest benefit is the timeline for soft money loans. While traditional loans from institutional lenders may take months, soft money loan application processes are much faster. Soft money loan applications can take as little as 2-3 weeks to process and you can have your money in that short timespan. When you are trying to purchase an investment property and the deal will close in a month, you can’t wait for traditional loans. It will be too late. If you have a tight deadline on your investment property and you want a quick turnaround, soft money loans are the best option.

KEEP READING: How to Diversify Your Portfolio With Real Estate

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If you have a tight deadline on your investment property and you want a quick turnaround, soft money loans are the best option.

Third Benefit

The third benefit is that an investment property borrower doesn’t have to worry about income verification. That means you don’t need to provide a source of income as a part of the loan application process. You can get approved for a loan without showing a bank statement or a pay stub. Another bonus is you don’t need to show your taxes on your income or assets. All you need is a decent credit score (above 650), some primary facts about your investment property and strategy, and provide documentation related to your previous investment experience. These are all the things you need, and you can be approved in 2-3 weeks and get the necessary money for your investment property. This is a great opportunity for an investor who may not have a stable cash flow. Additionally, this may discourage traditional bank lenders from providing you with a loan, but for soft money loans, this isn’t an issue.

Fourth Benefit

The fourth benefit is the variety of soft money loans. You can use them on a variety of investment properties. It can only be used for investment properties but there are so many options to choose from. Here are some options: single-family homes, condos, townhomes, multi-family homes, commercial properties, mixed-use properties, office properties, retail properties, industrial properties, warehouse properties, and so much more.

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The third benefit is that an investment property borrower doesn’t have to worry about income verification. That means you don’t need to provide a source of income as a part of the loan application process.

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Bottom Line

Due to the great perks of this loan program, soft money loan programs tend to be very exclusive. There are so many types of loans, so you want to make sure soft money loans are the ones for you. There are qualified mortgages and non-qualified mortgages and it can get confusing. This would be why it is important to reach out to a private money lender who has a lot of experience with non-qualified mortgages. A private money lender can guide you through the entire process and help you decide if soft money loans or another home loan may be perfect for your investment needs. But as mentioned previously, there are plenty of benefits of soft money loans for investment properties.

Contact DG Pinnacle Commercial, the leading hard money and NON-QM lender, to speak with one of our experienced loan officers at (305) 851-5225.

Concept of real estate investing with a model house on packs of banknotes | How to benefit from private money loans | DG Pinnacle Commercial - Miami Mortgage Lender

How to Benefit from a Private Money Loan

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How to Benefit from a Private Money Loan

Banks used to be the only option for real estate investors trying to take out loans. Nowadays, private money lenders are allowing investors to borrow money under more flexible conditions. Banks and traditional financial institutions can reject your loan application for multiple reasons—your credit score, your debt-to-income ratio, employment status, etc.— What private money lenders do is implement a framework that makes it easier and more conducive to be a real estate investor.

The real estate market moves fast, and it is often crucial to act quickly. But the process of getting a traditional loan through a bank can often be lengthy and complicated. Many of the solutions and loan programs from private money lenders are easier and quicker to get than through banks, which is why private money loans are often better options for real estate investors.

Making Investing Easier

The programs offered by private money lenders are designed for investors, who oftentimes can’t show their income and make a lot of monetary transactions. Companies like DG Pinnacle Commercial have put in place certain standards that make it easier to take out a real estate investment property mortgage. These include no tax returns, no upfront fees, and no junk fees.

The closing time for loans from private money lenders is much faster. This element can be crucial for investors, as sometimes the faster you close, the better chance you have at securing a transaction. Also, the LTV (loan to value) ratio is higher with private money lenders. Loans from traditional institutions on investment properties usually max out at 70% LTV, while those from private money lender like DG Pinnacle Commercial can go up to 85%. You’ll likely be spending less through private money lenders too. If you go to a bank, you’re going to have PMI (private mortgage insurance) with those loans, which means a few extra hundred dollars per month.

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Model house next to some coins and female hands in background | How to benefit from private money loans | DG Pinnacle Commercial - Miami Mortgage Lender

Banks used to be the only option for real estate investors trying to take out loans. Nowadays, private money lenders are allowing investors to borrow money under more flexible conditions.

The Loan Process

The first thing you’ll want to do to get a private money or NON-QM loan, for example a hard money loan is to contact a private money lender. As the borrower, you should be ready to provide the lender with information like the location of the property, purchase price, and estimated appraised value.

The lender will ask questions to get to know you and your borrowing history. After this, the lender will appraise the property and come up with a loan offer for you. The lender will review the documentation and complete the underwriting process for the loan. This process is usually speedy, but it varies from lender to lender.

After the loan is completed with underwriting it gets moved to the closing department. As a borrower, you’ll have to sign a variety of documents during this phase, but it is relatively straightforward. The lender will then send the funds to the title company so the deal can be completed.

Many real estate investors have found that getting loans from private money lenders is their best option for achieving their investment goals. Be it a hard money or a soft money loan, private money lenders are faster, more understanding, and more lenient than mortgage companies and banks. You have to consider that these companies’ sole purpose is to give loans to real estate investors, so naturally, they’ve found ways to make the process smoother. If you’re thinking of getting into real estate investing, you should definitely take these factors into account.

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Be it a hard money or a soft money loan, private money lenders are faster, more understanding, and more lenient than mortgage companies and banks.

Loan Officer handing some money with a wooden model house on top | How to benefit from private money loans | DG Pinnacle Commercial - Miami Mortgage Lender

Bottom Line

Contact DG Pinnacle Commercial, the leading hard money and NON-QM lender, to speak with one of our experienced loan officers at (305) 851-5225.