Private blanket loans come with some really good benefits. However, there are just a few small hurdles to get over, but not enough to dissuade you from obtaining these kinds of loans. These hurdles include having to provide continuous reporting, specific requirements for property management, bureaucracy on seasoning and occupancy. With these restrictions, most lenders tend to make it difficult for small real estate investors to acquire private blanket loans.
The Customized Option
A blanket loan is usually customized to meet the investor’s needs. Most lenders are aware of the long term and short term needs of real estate investors and their portfolios. Part of the benefit of blanket loans is expanding the investor’s portfolio in a shorter amount of time. This gives the investors more opportunities to add inventory on an ongoing basis.
Many lenders prefer to do business with investors that own their real estate property for three months to a year. This is known as ‘ownership seasoning.’ Without this, investors won’t be able to obtain refinancing. It means that the funds are tied up in the real estate property and the investor won’t be able to access it for use on other real estate investments. Most lenders only require investors to have thirty days of ownership seasoning. This permits the investor to acquire a ‘cash out’ on the property; much quicker so as to build on their portfolio.
Most lenders will qualify investors by looking at their credit score and not their debt to income ratio or tax return. Your credit score and credit history says a lot about how and if you will pay back the loan. Most lenders also look at the condition of the property, the loan to value ratio, gross monthly rent, and the appraised property value; among other things. In some cases, lenders will require the investor to submit a professional resume with property management experience. If you are a new investor, this may be an impediment.
There are some private blanket loans that lenders will market as being long term loans; giving you between 15 to 30 years to pay off. However, these loans are usually just partially amortized with balloon payment. This only gives the investor a shorter time to pay off the remaining loan balance and this is generally between five to ten years. Before you seek private blanket loans, it is best to find out what the lender requires.