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The world of investment properties has changed a lot over the past decade or so. Among other things, it’s harder than ever to secure the loans you need for an impressive portfolio.
That is, unless you know about the advantages of working with a nontraditional lender.
You may also hear a nontraditional lender referred to as a nonbank lender, but they both refer to the same type of entity.
Other popular names that sometimes used for these institutions include:
These are lenders that don’t operate like traditional banks. For example, they don’t take deposits or manage savings accounts. Generally speaking, they only originate loans and they generally operate solely through websites.
As The Washington Post reports, nontraditional lenders “have quickly become the largest source of mortgage lending in the country.” In 2009, only 9% of loans originated from nonbanks. By 2016, more than 50% or all mortgages came from these institutions. Their market share grew, too. Nowadays, 6 of the 10 largest U.S. mortgage lenders are nonbanks.
To be fair, a big part of this is because so many traditional banks have scaled back their efforts to offer mortgages. After the Great Recession, they came under increased scrutiny, which has hurt their ability to turn a profit on these loans.
That’s not the only reason nontraditional lenders are finding so many fans, though. Here are three more you should consider.
Fannie Mae’s guidelines may have been created with the best of intentions, but they most likely weren’t made with real-estate investors in mind. That’s because they won’t support any lender providing loans to a borrower who already owns 10 properties.
Furthermore, it gets harder to take on more mortgages after you already have six. According to their guidelines, “If the borrower will have seven to ten financed properties, the mortgage loan must have a minimum representative credit score of 720; all other standard eligibility policies apply.”
Any seasoned real-estate investor can see the problem here. After six mortgages, your credit score can suffer for a number of reasons, none of which mean you’re an unreliable borrower. In fact, most of these reasons would be temporary. This makes it nearly impossible to take out 10 mortgages from traditional lenders unless you stagger them over almost as many years.
For an ambitious investor, this is unfathomable, especially with the opportunities presented by the current housing market.
With a nontraditional lender like Our Company, this kind of red tape never keeps you from securing amazing opportunities.
Speaking of ambitious investing, most real-estate investors eventually reach the point where they’re no longer content to simply buy one or two properties at a time. Instead, they want to keep expanding their portfolios with multiple properties.
This often happens when an investor realizes a fantastic opportunity with a new development or in a neighborhood where multiple homes are up for sale.
Whatever the case, we’ve already covered why a traditional lender probably won’t be their first choice.
Traditional lenders will be much more open to the prospect, but they’ll also be able to offer the investor significantly more flexible terms. There’s no better example of this than an actual blanket loan.This unique type of mortgage can cover the financing for multiple properties. However, even if it funds half-a-dozen, the borrower only needs to worry about terms for one of them.
As you’ve probably heard by now, many people have become real-estate investors practically overnight simply by hosting through Airbnb.
Of course, it’s a great opportunity for more experienced investors, as well. If you’re familiar with a market, you probably already have some ideas about where you could invest in homes that would be perfect for Airbnb.
Unfortunately, traditional lenders have been slow to keep pace with investors’ demands for Airbnb loans. Their main focus is on people who want mortgages for primary residences. As they don’t understand the Airbnb market (they rarely understand the typical rental market), they have no idea how to properly underwrite a loan for one of these homes. Even looking at local vacancy rates doesn’t help when it comes to Airbnb.
Once again, this is where traditional lenders step in to help. Not all of them are familiar with Airbnb rentals, but those that are (like us) will have no problem assessing the loan-to-value (LTV) ratio of a potential home and offering you financing based on it. In our case, as long as it reaches 75%, we’d be interested in helping you purchase it.
As we touched on above, we stand out among nontraditional lenders because investment properties – including those for Airbnb – are our specialty.
First, we don’t look at income-to-debt ratios or need to review your tax returns. We’re asset-based lenders, so all we really care about is the property (though we prefer credit scores about 600).
Second, we streamline the process further because we understand this market. We know how important it is to act fast, so you can take advantage of opportunities as they arise. Our underwriters will never ask about how many properties are in your portfolio, much less limit your funding because of that amount.
Third, even though our process is incredibly streamlined, we can still offer you a number of different loan types, including:
We’re also more than happy to help with refinancing.
If you’re ready to continue building on your portfolio of properties, then it’s time to work with a non-traditional lender that understands your needs.
Contact us today, and we’ll show you why we’ve become so popular with investors just like you who want a streamlined path to the funding their ambitions require.
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