Lee’s Summit, I don’t promote hard money lending because there are to many private persons masquerading as large capital sources – when in reality they’re just “wanna be” players using bait and switch tactics to lure in the unsophisticated (and desperate) homeowners. (There are legitimate ones out there.)
But with the Lee’s Summit home buying market stagnating, there are emerging large well capitalized firms offering legitimate “portfolio lending” products for the self-employed buyers / borrowers who qualify for “Business Purposes Loans”.
Unlike hard money loans, “Business Purposes Loans” are only available to Lee’s Summit business owners with equity in either a primary residence or an investment property.
Equity in a Lee’s Summit property & a legit “business purpose” of nature of the transaction are the only factors involved in an underwriter’s approval.
The business purpose can be somewhat of a gray area because it can be so many things. A few examples of a “business purpose” can be classified as the following.
Purchasing an Investment Property
Purchasing of a non-owner occupied Lee’s Summit property by definition is business purpose. These loans can be as purchase money loans with the investment property being purchased used as collateral.
Lee’s Summit real estate investors are also allowed to cash-out of either their owner or non-owner-occupied properties to purchase an investment property.
It is important to know that it is not the occupancy that defines business purpose, but rather what the cash-out proceeds would be used for.
Cashing Out for Business Purpose
Many Lee’s Summit property owners also utilize their built-up equity in their home to cash-out for business purpose.
Here are some examples:
- Self-employed client needs working capital for their company.
- The working capital can be utilized to purchase another company, inventory, equipment, pay salaries, pay for marketing, etc.
- Lee’s Summit real estate investors are also allowed to cash-out of either their owner or non-owner occupied properties to make repairs or upgrades to an investment property.
Refinancing Lee’s Summit Investment Properties
1) Existing debt on investment properties is business debt and can count as a business purpose loan.
2) Whether the owner of the investment property is doing a rate & term refinance into a lower interest rate loan or to make repairs to their rental.
1) Any loan on a Lee’s Summit commercial property is by nature a business purpose.
2) Commercial property legislation varies from residential loans in that the cash-out proceeds can be for either a business or consumer purpose.
For example, an owner of a light industrial property can cash-out of their commercial building to pay off personal debts, but an owner of a Lee’s Summit residential property is not able to cash-out to payoff personal debts using a stated income, equity based hard money lender.
Business Purpose Loan Requirements and Thresholds
They vary from lender to lender. Details to Ask About:
Lien Positions: Usually 1st & 2nd
Loan Size: Varies
Residential: Usually SFR, Townhome, Condo, 2-4 Units (owner & non-owner)
Commercial: Usually Office, Retail,Light Industrial, Multi-Family, 5+ Units, Mixed Use
Loan to Value: Usually Up to 75% Purchases, Up to 70% Refinances
Combined Loan to Value: Usually Up to 65% CLTV
Term: Usually Up to 36 months
Amortization: Usually Interest only
Points: From 1.50%-3.5%, but vary
Interest Rates: From 7.50% -9.5%, but vary
Purpose: Business Purpose Loans Only (No Consumer Loans)
Credit Score Minimum: Usually None
Income Documentation: Usually Stated
DTI Requirements: Usually None
Debt Service Coverage Ratio: Usually Not Applicable
Qualify: Usually Equity and Loan Purpose
Closing Timeframe: Typically 7-10 business days
Who They Tend To Lend To: Individuals, Trusts, LLC’s, Corporations, Foreign Nationals