If you’re thinking about investing in an apartment property, it’s important to understand your options. There are several different types of multifamily loans, including government-backed and bank balance sheet.
Government-backed loans follow guidelines set by Fannie Mae, Freddie Mac, and the FHA. They typically offer lower interest rates but have more stringent regulations.
RCN Capital
When RCN Capital’s founder, Jeffrey Tesch, launched the company in 2010, he knew that starting a new lending firm would seem like an impossible task for those outside looking in. However, he believed that the complicated lending environment of the time was actually an opportunity for investors to seek workable solutions. He and his team were determined to fill a gap in the private money sector.
Since then, the company has grown rapidly and now serves a wide variety of real estate investors and brokers throughout the country. The company offers a range of loan products, including bridge financing, fix and flip financing, and long term rental loans. The company also provides a suite of loan-level analytics that can help borrowers determine their investment potential.
Unlike many other lenders, RCN Capital tailors their product to the needs of their clients. Rather than forcing their clients into a predetermined set of guidelines, they work with them to find creative solutions that will allow them to succeed. This allows them to build lasting relationships with their clients and provide a high level of customer service.
RCN Capital is a national direct private lender established in 2010. They offer short term fix and flip programs as well as long-term rental financing for real estate investors across the United States. They provide easy-to-use online application forms and can preapprove a deal within 24 hours. They also offer a white label program for correspondent lenders that enables them to offer their own loan programs with RCN’s branding.
Government-Backed Loans
Conventional mortgage loans are backed only by the lender’s own creditworthiness and do not have any backing from the federal government. This makes conventional mortgages more risky for lenders, resulting in stricter qualifying criteria and higher rates. Government-backed loans, on the other hand, are insured by a federal agency, which takes some of the risk off of the lender and allows them to offer more competitive rates and down payment requirements.
These loans are often referred to by the initials of the sponsoring federal agency, such as the Federal Housing Administration (FHA), the Department of Agriculture (USDA), and the Department of Veterans Affairs (VA). These non-conforming mortgages make homeownership more accessible for a variety of different homebuyers.
Specifically, FHA loans are designed for people with lower credit scores, USDA loans cater to rural buyers, and VA loans help members of the military community or their spouses buy homes. These types of borrowers would otherwise struggle to meet the credit and down payment requirements for a conventional mortgage.
While these loans are a great option for many, they may not be right for everyone. Before you decide on a loan, it’s best to talk with a mortgage lender like Integrity First Lending to find out what your options are and what type of mortgage will work best for you.
Bank Balance Sheet Loans
Whether you’re an apartment investor looking to purchase a multifamily property or are simply searching for investment property financing, there are many options available. The type of loan you choose will depend on how strong your credit and financials are, as well as how long you plan to hold the property once purchased.
One option is a bank balance sheet apartment loan, also known as portfolio loans. These loans are held by the lender that issues them and don’t have to adhere to government guidelines, so they may allow higher debt to income, loan to value, and loan size maximums than other options. However, they may also carry higher interest rates and fees.
Another option is a government-backed apartment loan, which typically follows guidelines from either Fannie Mae, Freddie Mac, or the Federal Housing Administration. These loans can take longer to fund than other types of investment property financing, and they usually require a minimum occupancy requirement and are non-recourse.
Finally, there are short-term apartment loans, which can be used to buy and fix-and-flip a property. These loans offer fast funding, allowing you to compete with all-cash offers on properties. Short-term apartment loans can be obtained through RCN Capital, which offers both short- and long-term apartment loan programs. Visit their website to learn more. Regardless of which type of financing you choose, be sure to use a mortgage loan calculator. These calculators can help you determine how affordable a specific apartment property may be by providing you with an amortization schedule that shows the proportion of interest to principal each monthly payment will contain.
FHA/HUD Loans
The Federal Housing Administration is a branch of the Department of Housing and Urban Development (HUD). It oversees HUD-insured multifamily loans. These loans have several advantages over conventional mortgages. For example, they allow you to put down less money upfront, and they have lower credit requirements. You also pay a smaller upfront mortgage insurance fee that can be rolled into the loan amount. In addition, HUD-insured multifamily loans are nonrecourse.
In addition to lowering the financial bar for many potential homeowners, these loans also have more generous underwriting guidelines. This makes them ideal for borrowers with weaker credit histories. FHA loans also have low debt-to-income ratios and minimum down payments. For example, some programs allow a DTI of up to 53%. This is much higher than the DTI of most conventional mortgages, which usually only allow up to 36% DTI.
Another benefit of these loans is that they are easy to refinance. Many lenders offer FHA loans, but it’s important to shop around. You can find lenders who specialize in offering these loans by using HUD’s lender lookup tool. You should also compare the rates and fees that each offers to ensure you get the best deal. Also, make sure you gather your documents before applying, including two years of tax returns; current pay stubs; and full statements of assets.