The Mandrell Company strongly believes that an intimate understanding and realistic analysis of one's financial standing is the very first step when considering your standing in the Real Estate market. Whether you are a buyer, seller, investor, or developer, a thorough assessment of your finances is crucial and priority number one as a first-time home buyer or a serial investor.
Residential buyers and sellers often find themselves in the vein of conventional mortgages; whereas investors and developers are more likely to seek non-conventional financing. Our understanding of and experience in conventional and non-conventional funding is the foundation of The Mandrell Company's success and reputation.
Do you need assistance locating and securing financing? Our agents are primed to connect you with the best financial experts (accountants, loan officers, etc.) in Boston in order to help you thoroughly understand and determine the financing avenues available to you. Our network consists of top-rated lending professionals with expansive and creative options for both conventional and non-conventional loan products. That same network extends to include an elite, dilligently-cultivated group of Boston investors and developers who are always looking to partner or invest in projects throughout the greater Boston area.
To get you started and provide you with immediate financial-literacy value, here is a glossary of loans and a brief description of each product:
Conventional Mortgages (Owner-Occupied)
The benefit of an owner-occupied home loan product is the low down payment requirement: currently loans as low as 3.5% down. An FHA-approved buyer and property can get started much sooner with a 3.5% down payment vs. needing to save up 20%. However, every blessing comes with a curse. While the FHA's low down payment offers are great, the FHA also requires an additional payment, called Private Mortgage Insurance (PMI). PMI protects the lender and is required when the down payment on an FHA loan is less than 20%.
Conventional Mortgages (Investors)
Most traditional conventional mortgages require a minimum of 20% down, but may extend higher to 25-30% for investment properties, depending on the lender. Conventional mortgages are the most common type of mortgage used by home buyers and generally provide the lowest interest rates.
The 203K loan allows a homeowner to purchase a house that is in need of some rehab work and gives them the ability to finance those repairs or improvements into the loan itself. Like the normal FHA loan, the 203K allows for the same low down payment requirement (currently just 3.5%). This loan type is also applicable to the purchase of duplexes, triplexes, and fourplexes, but maintains the same requirement for only being “owner-occupants” and comes with Private Mortgage Insurance (PMI) demands on loans with down payments under 20%.
Hard Money Loans
Hard Money is financing that is obtained from private businesses or individuals for the purpose of investing in Real Estate. While terms and styles change often, Hard Money has several defining characteristics:
The loan is primarily based on the value of the property
Short-term lengths (due in 6 – 36 months)
Higher-than-normal interest rate (8-15%)
High loan “points” (fees to get the loan)
Many Hard Money lenders do not require income verification
Many Hard Money lenders don’t require credit references
Does not show on your personal credit report
Hard Money can often fund a deal in just days
Hard Money lenders understand when the property needs rehab work
Hard Money can be beneficial for short-term loans and situations, but many investors who have used Hard Money lenders have been placed in tough situations when the short-term loan ran out. Use Hard Money with caution by making sure you have multiple exit strategies in place before taking out a Hard Money loan.
We speak to investors almost every day who want to invest in Real Estate in some form or fashion and want to use retirement funds (that probably aren’t earning enough to keep up with inflation) to do this. Once your money is in a retirement account, you need to put it to work. Investing in what you know best via self-directed accounts is one way to accumulate massive amounts of wealth in a relatively short period of time. You can have total control over your retirement and invest in alternative assets outside of the choices provided by your financial advisor.
While most of the above options focus primarily on the residential side of loans, the world of commercial lending may also be a viable option for your investing. In fact, if you are looking to buy a property other than a one to four unit residential property, a commercial loan is probably exactly what you’ll be needing. Commercial loans typically have slightly higher interest rates and fees, as well as shorter terms and different qualifying standards. The commercial lender will still look at your income, credit, and other personal financial indicators, but only to gain a picture as to your skills financially. What’s more important in the vast majority of cases is the amount of revenue a property generates.