Loan Philosophy: The Difference Between Lenders and Investors – qualifications for a conventional mortgage loan

Loan Philosophy: The Difference Between Lenders and Investors – #Loan #Philosophy #Difference #Lenders #Investors – qualifications for a conventional mortgage loan

As a mortgage broker, I have the pleasure of seeing Quite a number of potential loan transactions. I used the word “potential,” because not all of them work out. Exactly, there are Quite a few turkeys in with the swans!

A Public scenario is a refinance or a purchase where the investor comes to me with something like: “Man, this is the BEST property in the area, it’s worth $5 Million Dollars, and I’m buying it for $3 Million! I need a 90% loan and I need it NOW!” OK … so I’ve exaggerated Merely a bit. In reality the value of the property Testament probably be accurate for the market, but I’ll still get the request for the high loan to value.

Until recently, I probably couldn’t have gotten a 90% loan on a commercial property But in the limited case of a Small Trade Administration guaranteed acquisition loan. First, because no one offered a 90% loan on commercial property and second, because the property most likely wouldn’t have supported the debt service.

The Large change in that scenario has been the advent of the “small balance commercial lender” in the Latter couple of years. They blend commercial and residential underwriting methods To Gain higher LTVs. I’ll save an article on this Friendly of lender for later because I want to focus on the reason why a conventional commercial lender doesn’t really care how Fantastic of a deal the investor is getting in a Particular property. It’s because there is a very basic difference in philosophy between lender and investor.

An investor is concerned with maximizing the return on his Justice. Whether through leverage, adding value by making improvements, or adding value through improving a property’s cash flow, the goal is to make as much money on the Justice investment as possible. The return he receives is commensurate with the risk he takes with his Justice investment

A lender is concerned with something entirely different: Getting paid back! A lender approaches a loan as an “investment,” as Friendly. In fact, in the loan Trade we often call our lenders “investors.” But these investors To Near their investment from the standpoint of managing their risk in return for an acceptable rate of return: The note rate on the loan. The property that the investor views as a growing asset the conventional lender views solely as security for the loan. (Again, I’m not talking About private lenders who might have other motivations).

So In Case you hear an investor say something like: “I don’t understand why they didn’t give me the loan! The property is worth SO much and they can always take it back In Case I don’t pay!” Friendly, the reality is that the lender doesn’t want the property back … they Merely want their money back, as agreed.

#Loan #Philosophy #Difference #Lenders #Investors
qualifications for a conventional mortgage loan