Top 5 Loan Options You Would Need In 2022

Loans remain to be a powerful financial tool for growth. Whether it is to finance your personal needs or boost your small business, loans are there to help you achieve your goals. However, there are different types of loans applicable for different situations. Here are the top 5 loan options you would need in 2022, offered by mortgage broker Phoenix AZ institutions.

Personal Loan

This is money borrowed from private lenders, credit unions, or banks that must be paid back in monthly installments for two to seven years. These usually do not require collateral since they are unsecured.

As a borrower, your income, debt, and credit profile will be considered before getting approved. Additionally, you must pay the installments on time to prevent penalties and avoid hits on your credit score.

Your chances of getting approved increase when used for something reasonable such as; financing, increasing your financial standing, home improvement, debt consolidation, and more.

Personal loans are advantageous because no tax returns or pay stubs are necessary. These are also available in higher loan limits and may be used in virtually anything – home improvement, purchasing second homes, and other investments.

However, personal loans have their share of disadvantages. These may have higher interest rates, so it helps to check if the interest rate is something you could manage. Additionally, personal loans may not be offered by all lenders.

Bank Statement Loan

Bank statement loans allow you to be qualified based on your bank statements instead of your tax returns. It is an excellent choice for self-employed people or those who do not have income that can be traditionally documented.

Bank statement loans are non-qualified mortgages which means that these do not qualify for the standards for conventional loans. As such, these loans are less regulated, and you might not get the typical consumer protection offered with other loan types.

However, not all lenders offer bank statement loans, and these loans often come with a high mortgage rate. Do not be discouraged because there are many ways to secure a good deal, although it may take more effort than other loans. Reach out to the mortgage lenders you are interested in and inquire about their lending requirements. Just make sure to compare different companies to get the best offer.

Interest Rate Reduction Refinance Loan

An interest rate reduction refinances loan is an excellent choice if you have a VA-backed home loan and you wish to lower your monthly mortgage. This is also helpful for making your payments more manageable and stable.

To be eligible, you must have a preexisting VA-backed home loan, and you are applying with the intent to refinance this loan. Additionally, you must provide proof of residence in the area covered by this loan.

To find a lender, the first step is to approach a lender that offers IRRRL. This includes a mortgage company, a private bank, or a credit union. It helps to review, compare, and contrast different companies to be made aware of your options.

Next, provide the necessary information required by the lender. You may take the Certificate of Eligibility from your original VA-backed home loan or have the lender request it electronically through the VA Home Loan portal.

Lastly, follow through with the instructions from the lender on how to close the IRRRL loan and pay your closing fees. You may need to place a down payment which will help lower the loan costs.

Home Equity Loan

A home equity loan is also known as an equity loan or home installment loan. This type of consumer debt allows homeowners to take out a loan against their home equity. The amount is determined based on the difference between your mortgage balance and the current market value of your home.

There are two main types of home equity loans: fixed-rate loans and home equity lines of credit. A fixed-rate loan is a type of loan with an interest rate that remains unchanged in the long term. Borrowers prefer this for long-term loans since they can be protected against inflation.

Home equity lines of credit can be compared to a credit card in which you can spend up to your credit line maximum. You only need to pay off what you spent. This usually spans thirty years, wherein you have a 10-year period to spend and 20 years to pay back what you spent.

Small Business Loans

A small business loan is the best type of loan for small enterprises looking for expansion or financing. This allows small businesses to gain capital without losing equity. It kickstarts and allows them to remain in control.  

Think of small business loans as a way to access capital for your business. It can also be used for improvements, technological advancements, renovations, staffing, acquisitions, real estate expansion, and more.

The lender or bank will first assess your business and gauge the amount of debt you can afford before granting the loan. Additionally, other factors such as the condition of the business, availability of collateral, character, and income will be considered.

Small business loans can be further divided into SBA 7(a) loans, SBA 504 loans, conventional loans, and business lines of credit. As a borrower, it is up to you to assess which type of loan best suits your needs. It helps to compare various lenders’ offers since terms, qualifications, and rates may vary.

Make sure to approach your mortgage broker, Phoenix AZ options, and inquire about loan options that best fit your needs.

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5 Reasons Why Bank Statement Mortgage Loans are Beneficial for Self-Employed Individuals

Buying a home is among the most significant purchases you’re likely to make, and before you take this step, you should ensure that your finances are in order. The first step to buying your dream house starts by checking your bank accounts and billing statements; it will give you an idea of how much you make and spend each month.

Some of the critical questions you may need to ask yourself include:

  • Do I have a stable job or income?
  • Can I save some money every month?
  • Do I have existing debts like a student loan or car payment?

After answering these key questions, you might want to consider applying for a bank statement mortgage loan.

What are Bank Statement Mortgage Loans?

Also known as bank statement loans, bank statement mortgage loans are a category of home loans that allow borrowers to get a mortgage without the regular documents required by most lenders to approve a loan. Sometimes, these loans bear other names like “self-employed mortgages” or “alternative documentation loans.”

Self-employed mortgages mainly work for independent contractors or business owners. They can also work for those who don’t have a steady income or have multiple employers to approve their salaries. The main point about these loans is that they are issued based on personal information and bank statements instead of tax returns or employer verification.

Requirements for Bank Statement Mortgage Loans

Since bank statement loans are non-qualified mortgages, each lender comes up with its own rules. These rules may vary from one borrower to another. For instance, some lenders may require 12 months of bank statements, but if you have a low credit score or other issues that may impact your creditworthiness, a lender may ask for up to 24 months of bank statements. Overall, the guideline for obtaining a bank statement mortgage loan includes:

  • Bank statements for the past 12 or 24 months
  • A reasonable down payment of usually 10% of the purchase price or more
  • Documented proof of cash reserves, which may include cash savings or assets
  • A decent credit score and clean credit report between 580 and 620 or higher
  • A business license if needed in your line of work
  • A profit and loss statement for the last 12 months of trading

Besides, a borrower may need a letter from a professional accountant or tax expert confirming tax filing in an appropriate self-employed category. In this regard, a borrower also needs to confirm that their expense deductibles are in order. Overall, some lenders are flexible and may not deny you a loan even if you lack one or two of these requirements.

5 Reasons Why Bank Statement Mortgage Loans are Beneficial for Self-employed Individuals

Bank statement loans offer the following benefits to self-employed individuals:

No Tax Returns or Pay Stubs Required

Regular lenders would ask for the average tax returns, form W-2, or pay stubs. Eligible non-self-employed individuals often obtain their W-2 form from their employers every year to verify proof of income. For self-employed individuals, this is not possible because they don’t have a standard employer.

The debt-to-income ratio doesn’t affect the loan

The debt-to-income ratio (DTI) is the term used to determine the amount of income a person or an organization generates to enable it to service debt. Lenders use this term to assess the borrowing risk of a person or an entity. A low DTI ratio may indicate sufficient income to service debt. However, it doesn’t matter whether the borrower has a high DTI ratio in applying for bank statement mortgage loans.

Borrowers can enjoy high loan limits

Usually, mortgage loan limits depend on various factors, including credit score and location. However, each lender can only give what it’s comfortable with. In the case of bank statement loans, borrowers can get high limits based on the prevailing FHFA rates.

Loans can be used for a primary residence, second home

Notably, there’s no restriction regarding what a borrower can do with a bank statement loan. The loan can be applied to a primary residence, a second home, or an investment property.

Manageable down payment

According to a report by the National Association of Realtors, down payment is the most challenging part of the home-buying process. Some homebuyers look for assistance to fund their down payments. However, most lenders offer manageable down payments, sometimes as low as 3% of the total mortgage cost for bank statement mortgage loans; this makes it beneficial to self-employed individuals.

Who Should Apply for Bank Statement Mortgage Loans?

Bank statement loans are often suitable for people without a steady cash flow. They are also ideal for those who can’t get proof of income from their employers. Generally, the following categories of people can benefit from bank statement loans:

  • Freelancers
  • Consultants
  • Doctors
  • Lawyers
  • Real estate investors and agents

People in these professions might find getting a standard or FHA loan demanding because the income on their tax returns is often adjusted for business write-offs and other necessary deductions. Consequently, it might not give a true reflection of the amount of income one earns.

Choosing a Reliable Lender

For anyone looking for a mortgage loan, it’s always important to shop from different lenders; this can give an open field for comparing offers. Consequently, borrowers can save a substantial amount of money on their loans based on quotes from different lenders.

Well, Bank Statement Mortgage Loans may attract higher interest rates. Besides, not all lenders can offer them. All the same, they remain a convenient option for a self-employed individual.  

How To Get Cash Out of Your Investment Property With No Income Documentation

As investment values increase in many areas, savvy real estate investors recognize the opportunity to tap into their property’s equity. A cash-out refinance on investment property is one of the best opportunities to make the most out of this situation. There are countless uses for those funds — home improvement projects, adding new property, or managing other financial needs unrelated to the property itself. Depending on the amount of equity, you could see a significant amount of financial improvement, especially with a cash-out refinance with no income documentation.

How does a cash-out refinance on investment property work?

A cash-out refinance allows the property owner to secure a new mortgage on the property for more than they currently owe on it. They then receive the difference (new mortgage amount minus what is owed and closing costs). Using a real estate investment, it’s possible to capture funds during these high home value times to use to advance your portfolio or simply lock in low rates for other needs.

Why use a cash-out refi?

Many property owners, including investors, have equity in their real estate that they don’t tap into and use as readily as they should. Yet, they may be paying a much higher interest rate on unsecured debt or battling financial difficulties in managing their investment business. Interest rates on real estate are competitive — and the same goes for cash-out refinancing. Taking advantage of those funds now may help to make your financial future a bit stronger.

What are the details and specs of a cash-out refinance on an investment property?

If it is time to improve your cash reserves through a cash-out refinance loan, here’s what you can expect from us:

•      Get up to 75 percent loan-to-value on your home – no reserves required

•      You may not need any employment or income documentation to secure these funds.

•      Boost investor cash flow to use as you need.

•      Borrow up to $2 million

•      30-year fixed loan (no bothersome adjustable-rate mortgages to worry about)

You can use this type of loan on most types of real estate, making it more accessible to many real estate investors. That includes:

•      Single-family residences

•      2-to-4-unit condos, townhomes, and non-warrantable condos

•      Non-owner-occupied properties only (cannot be used on primary residences)

There are a few other things to know about a cash-out refinance on investment property. For example, to qualify on cash flow, you’ll need 12 months reserves for negative cash flow. The cash-out can be used to cover reserves.

What can you do with a cash-out refinance loan right now?

Expand your horizons when you consider all the potential options for using these loans to meet your needs. Many times, property owners use these funds to put value back into their investment properties. You can do this in many ways, including home improvements. Get the property in better shape so you can attract a higher-paying tenant. It may be possible to use these funds to expand the existing property’s footprint through an addition. That may allow investors to increase their rental opportunities.

Other investors use these funds to invest in another property. Buying another rental property with a low interest rate and low monthly payment using these funds simply makes sense for many people. It is one of the best ways to expand a real estate portfolio in current conditions.

Pay down personal debt with these loans. While mortgage payments may continue for a bit longer on the property, you may be able to comprehensively pay down your debt outside of that loan. Doing so may save you money since interest rates tend to be much lower on a cash-out refi than personal, unsecured debt.

Use the funds in any way that fits your needs right now. Tuck them away for the future. Know that a cash-out refinance loan is one of the most effective ways of utilizing the value of your property.

The Benefits of Using Unsecured Business Purpose Loans

For many small businesses, obtaining a business loan can be quite difficult as many small business owners don’t have the collateral to pledge for a traditional secured loan. Therefore, unsecured business purpose loans are often a better option. While unsecured business loans are often tougher to qualify for and can carry higher interest rates than secured loans, they ultimately hold less risk for borrowers. 

Below, you’ll learn more about the benefits of using unsecured business purpose loans, how unsecured business loans work, and the steps you can take to obtain an unsecured business loan today. 

Understanding Unsecured Business Loans 

Essentially, unsecured business loans work in a similar manner as traditional secured business loans. However, the main difference is that borrowers are not required to offer a form of collateral with an unsecured business loan. But, as with any loan, there are pros and cons to securing this type of funding for your small business financing needs.

Pros of Unsecured Business Loans 

  • They can be easy to obtain because they typically offer a faster application process compared to secured business loans. 
  • Unsecured business loans can offer a quick approval time, with some lenders approving unsecured business loan applications in as little as 24 hours. 
  • There are often fewer restrictions associated with unsecured business loans. 
  • There’s less fear surrounding property loss as lenders must have a court order to take business or personal property if an unsecured business loan isn’t paid. 
  • If your business files for bankruptcy, courts often discharge unsecured loans, whereas secured loans are typically not discharged. 

Cons of Unsecured Business Loans 

  • Lenders typically require personal guarantees. This means that the owner of the business signs an agreement in which they agree to personally repay the loan if the business is unable to do so. 
  • Unsecured business loans are often riskier for lenders since they do not have collateral such as real estate to secure the loan, which typically causes these types of loans to have a higher interest rate. 
  • With unsecured business loans, the repayment terms are often shorter, and they may require more frequent payments.
  • Qualification for an unsecured business loan often has much stricter qualification requirements and can be difficult to obtain, especially if you or your business have a low credit score. If you don’t qualify for an unsecured business loan, you might want to look into other financing such as lines of credit, a merchant cash advance, or other business credit cards..  

Now that you know what an unsecured business loan is and its pros and cons, let’s look at how unsecured business loans work.

How Do Unsecured Business Loans Work? 

Unsecured business finance options work like traditional types of secured debt financing. However, with unsecured business loans, borrowers are not required to provide lenders with any form of collateral. Overall, instead of looking at the borrower’s collateral, lenders look at the borrower’s creditworthiness. Generally, you must have a minimum credit score of 680 for a bank to consider you for an unsecured business loan.  Lenders also look at the loan amount and the business’s cash flow to determine whether the business is a good risk in terms of providing a loan. 

Steps to Obtain an Unsecured Business Loan 

To obtain an unsecured business loan, you will need to follow certain steps to make sure you are even eligible to apply. The following includes some of the criteria you will need to meet in order to qualify for an unsecured loan from a bank. 

  • You will need to have multiple years of documentation for your business. 
  • It is in your favor to have a strong personal credit score. 
  • You should have an excellent annual revenue as banks examine this element before granting a loan. 

Once you have determined if you meet the criteria of the three elements mentioned above, you can then start the process of obtaining an unsecured business loan from the financial institution of your choice. It is also beneficial to create a detailed business plan before seeking an unsecured business loan from a bank or other financial institution. 

In your business plan, be sure to include:

  • A company description
  • What products or services your business sells
  • The management structure of your business
  • An analysis of the industry your business is in
  • A SWOT analysis of your business
  • Any other vital information regarding your business

When applying for an unsecured business loan, keep in mind that the most likely place to obtain this type of loan is from an alternative lender rather than a traditional bank. Popular alternative lenders are financial technology firms that use automated technology to determine a small business’s credit history and overall creditworthiness. Frequently, alternative lenders end up charging borrowers more than traditional banks or credit unions. These are all elements to consider when looking to obtain an unsecured business loan from any type of financial institution, including the Small Business Administration’s (SBA) small business loans. 

How Blake Mortgage Can Help  

Hopefully, through this overview on unsecured business loans, you have been able to see some of the benefits this type of loan can provide to you and your small business operation. If you’re looking to start the process of obtaining an unsecured business loan, then Blake Mortgage is here to help. 

The dedicated team at Blake Mortgage works diligently to connect you with a wide variety of financial institutions that are willing to lend money to small business owners seeking loans. Whether you’re worried about qualifying for a loan or simply getting the best rate, we can help. 

Are you ready to discover how Blake Mortgage can help you obtain a business loan today? If so, give us a call or make an appointment to learn more.