If the current housing market uncertainty has made it difficult for you to move forward with your home buying or investment plans, you’re not alone.
The market twists and turns during and following the COVID-19 pandemic have made it challenging for all types of borrowers to confidently make decisions.
The factors affecting the market, including inflation, high home prices, rising mortgage rates, and low inventory, are also causing mortgage lenders to tighten their requirements, which makes it even more difficult to move ahead.
However, borrowers have other funding options they may be unaware of.
Let’s dig into the current housing market uncertainty, and how experienced hard money lenders can offer a more fast and flexible solution.
Is there uncertainty in the housing market?
There is plenty of uncertainty in the market right now.
Some of the biggest unknowns that borrowers are struggling to navigate, include:
- How high mortgage rates will climb
- Whether home prices are going to start dropping
- If there will be enough inventory
- How inflation will continue to impact the market
While these uncertainties are fairly common in history, what is making the current market so intense is the struggle to find balance after the Covid-19 pandemic turned the market upside down.
During the pandemic, the Federal Reserve lowered the funds rate to help the economy.
Mortgage rates reached record lows, buyer demand intensified, and soon enough home price growth hit record highs.
Inflation pushed new limits, and the Fed then began raising the funds rate in response.
Now, mortgage rates are rising and housing affordability is at its lowest level in 30 years.
Data-backed market forecasts expect that during the remainder of 2022, housing supply will rise and home price growth will begin to slow, but no one can say for sure how long it will take to find a balance.
Meanwhile, experts are also unsure what’s going to happen with the rising interest rates.
The best that traditional lenders can offer to home buyers is the encouragement to borrow anyway, even as more and more people are priced out of the market.
But when these borrowers attempt to move through the application process, they quickly find out they don’t qualify.
A hard money lender is able to offer borrowers much greater flexibility during periods of uncertainty, because they aren’t bound to any set requirements.
What’s your loan scenario?
Will home prices drop in a recession?
Historically speaking, home prices drop in a recession. Demand falls, and as a result, sellers are forced to cut their prices.
But are we actually in a recession yet? The answer is surprisingly unclear.
According to a recent poll by the National Association of Business Economics (NABE), 72% of economists expect a recession by the middle of next year, and 19% say it may have already started.
If you check the latest news headlines, you may find some that claim we are in a recession, and some that say we’re about to be.
This could be good news for buyers as the market shifts in their favor, but the question then becomes how long until these shifts show real change.
Fortunately, when it comes to hard money lending, this status doesn’t matter.
How is a hard money loan different from traditional mortgages?
A hard money loan gives borrowers opportunities they may never have with traditional loans.
Traditional lenders include banks and credit unions. These lenders must follow specific lending requirements driven by Congress-created mortgage companies Fannie Mae and Freddie Mac.
A conventional bank loan, which is the most popular loan type, has specific requirements for a borrower’s credit score, debt-to-income (DTI) ratio, income, employment history, and more.
Borrowers must provide extensive documentation to prove they can repay the loan, and the entire lending process can take several weeks or a few months to close.
During periods of market uncertainty, banks tighten their lending requirements to minimize risk. This means they often block out perfectly capable borrowers just because they don’t hit certain marks.
How do hard money loans work?
To fulfill the gap in the industry left behind by traditional lenders, private money lenders stepped in. These lenders are private investors or funding groups with years of industry experience.
Private lenders make decisions based on common sense and the overall merits of the deal, rather than forcing the borrower to fulfill certain requirements.
Speed is one of the biggest hard money loan pros. With the freedom to set their own borrowing requirements and the expertise to quickly understand what makes a good deal, private lenders can make same-day decisions and provide funding within a few days.
Private lenders will want to know yourwant to know the purpose of the loan and your exit strategy and your exit strategy, or how you intend to pay back the loan.
You will likely need to show support by providing some documentation, but it will be flexible and make sense for your unique situation. Many times, loan approval can be determined over a quick phone call.
Hard money lenders: What to know about working with them
The most important thing to know about working with a hard money lender is that your relationship with them matters. To these lenders, you aren’t just another transaction, but rather a true investment partner. However, not all private lenders are created equally.
Marquee Funding Group is the ethical standard in hard money lending. We’re an honest, transparent, hardworking team of real estate investors and loan originators.
Our team specializes in complex or unusual lending scenarios. These are the kinds of situations that traditional lenders won’t give the time of day.
Hard money has a reputation for being a “last resort” option only for those with poor credit or those in specific real estate scenarios, but this is an outdated view. Hard money lending serves a wide range of purposes, for a wide range of borrowers.
Marquee Funding Group offers the following loan options and benefits:
- Same-day approvals
- Closing in as fast as seven days
- Loan amounts from $50,000 to $20 million
- Loan-to-value up to 70%, deal-specific
- Purchase money loans
- Rate-and-term refinance and cash-out refinance
- Owner-occupied and non-owner-occupied consumer or business purpose loans
- Single family, multi-family, commercial, industrial, and land loans
- Construction loans, including ground-up, fix-and-flip, fix-and-occupy, and value-add
If you’ve tried to get a mortgage loan with a traditional lender in this uncertain market and were turned away, Marquee Funding Group can help.
Hard money loans generally have higher interest rates than conventional loans, but they’re meant to be shorter-term loans to help you access cash flow immediately, then transition to a more permanent source of financing later.
We think you will love our common-sense approach to lending, and our flexibility and skill in helping you navigate this tumultuous market period.