Coronavirus Updates

Rates Are Historically Low, But It’s Extremely Hard to Get a Loan—Here’s Why (& What to Do About It)

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
162 Articles Written

Real estate, like all other asset classes, goes through market cycles. As the market goes up, property values increase, and the ability to get a loan generally becomes easier. As the market goes down, property values decrease, and the ability to get a loan generally becomes harder.

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When the loans get harder to obtain, you may begin to ask yourself:

  • Why has it become so much more difficult to get a loan today, when two months ago it seemed easy?
  • And most importantly, how am I going to fund my next deal?

Do I have your attention yet? Good.

Read on, and be sure to watch the video below for further information.

Now, in order to answer the above questions, we need to take a step back and see how lending has evolved in real estate.

Recent History of Lending

I started investing in real estate when I purchased my first duplex in 2004 outside Philadelphia. I used a $30,000 private loan. Since that first deal, I have seen four different lending markets.

From 2005- 2008, real estate went through its infamous “no-doc” period, which basically meant giving out loans with no required documentation. As you can imagine, this did not end well—it caused a collapse in asset prices not seen since the Great Depression.

From 2007-2010, the pendulum swung the complete opposite way, and getting a loan became extremely cumbersome. This period was famous for the ample amount of deals to buy—but no capital to buy with.

For the last nine years, the process of getting money for a deal can be summarized in one word: easy. When I talk about getting money, I’m referring to the debt of the deal.

For example, say an apartment building costs $1 million. For simplicity purposes, I have to raise 25% (or $250K) for the deal from my investing partners, leaving the remaining 75% (or $750K) to be funded by a debt provider, such as a bank, agency, or private lender.

Obtaining that 75% debt has been “easy” up until COVID-19 hit. Now we enter what I call the “corona crazy” environment.

To put it simply, the world has changed—in almost every way—in the last two months. These changes have drastically affected an investor’s ability to get loans on deals.

Where Can You Get Money for Your Next Deal?

Your Network

The first place to look to get money for your next deal is your own network. I talk about the different ways to cultivate your network in order to raise capital in my BiggerPockets book Raising Private Capital.

But even if you could raise all the funds needed for a deal, you probably wouldn't. Why? Because real estate's greatest asset is leverage.

The ability to put down a 20- 25% down payment in order to obtain a large leveraged asset is a great wealth creator. (A word of caution here: the opposite is also true—too much leverage is a great wealth destroyer.) So after you raised your initial funds—usually consisting of your down payment, closing costs, capital expenditures, and operating expenses—you turn your attention to the debt market.

While it may be difficult to get a loan, the investor’s reward is that debt is currently experiencing historically low interest rates. As I write this article, the rates are between 2.5- 4%. Those are impossible to beat!

Related: The Fed Cut Interest Rates to 0% — What Does This Mean for You?

Certain Banks

Not all banks are lending these days. In fact, most aren’t. To understand which are, you need to know where the banks get their money.

Balance sheet lenders use the money that’s been deposited with them to fund loans. They lend it out and earn interest on the loan. Since the funds are staying on the balance sheets of the bank, the bank can hold onto the loan for as long as it chooses. These balance sheet lenders are typically smaller, regional banks.

The alternative to a balance sheet lender is a warehouse lender, where an enormous bank or a large institution like Fannie or Freddie provides, in essence, a line of credit for small intermediaries to originate loans. The main goal for a warehouse line is to originate loans and package them up to sell in order to pay back the warehouse line of credit and then repeat the process.

Mortgage loan agreement application with house shaped keyring

So, how do you know which banks to go to?

It’s simple, ask them if they’re a balance sheet lender. (You’re speaking their language now!) Again, if you’re unfamiliar with the term, it just means that the bank is loaning their own money and does not plan on collateralizing or selling the loan.

If they are a balance sheet lender, you will have a better chance of them funding your deal. If they’re not, then there’s a very good chance they are not lending at this time.

And if they are lending, you may have another problem…

Why Is It Much More Difficult to Get a Loan Right Now?

Two months ago, it seemed so easy to secure a loan. But because of COVID-19, these warehouse lines have dried up. Some of it is due to the fact that Wall Street funds were backing these lines of credit, but the main reason is the unpredictability of today’s environment. Large institutions are taking a pause and shutting off the spigot.

The second major reason is that when the debt providers underwrite your deal, they look at the income available to pay down the loan. This is commonly known as the debt service coverage ratio (DSCR).

Up until the corona craziness, residential real estate has been fairly stable from an income perspective. When people decide which bills to pay, rent is usually given the highest priority in the hierarchy of expenses. Because of this factor, banks were always able to make certain assumptions on income projections—which in turn made underwriting easier for the banks.

credit-report-loan

However, in the tumultuousness we’re currently living in, underwriters have no way of projecting what the future income for a property will be. Compounding this issue, the numbers are looking worse and not better in the near future, as unemployment approaches Great Depression levels.

With this bleak outlook, a lender’s best chance to underwrite your deal is if the current month’s rent collection is strong. This can be a saving grace for current loan applicants or a death blow if the collections weren’t so hot.

Related: 12 Influential Investors Weigh in on How to Survive the Coronavirus Crisis

The Gorilla in the Room

And now it’s time to talk about the big gorilla in the room: Fannie and Freddie, who collectively are commonly referred to as agency debt. Agency debt is insured by the federal government and provides lenders the funds needed to loan on everything from a single-family all the way up to hundreds of units.

Given the vacuum created by the warehouse lenders stopping their loans, Fannie and Freddie have changed their terms. Fannie and Freddie are now requiring anywhere from six to 18 months of operating expenses. While they do give back the funds if your deal performs, it requires the investor to raise an enormous amount of escrow just to close a deal.

Conclusion

So, how are YOU going to fund your next deal?

In short, this article is a snapshot of today’s lending environment. You need to be aware of who you should go to for the best chance of securing a loan.

There are two main options in funding a deal right now: a balance sheet bank lender and agency debt. Without strong income in the current month, a balance sheet lender most likely won’t lend you the money, and without strong reserves, agency debt won’t lend you the money.

But then again, getting into a deal without strong income and reserves may not be the best thing for you anyway.

As mentioned, if you want to hear the full discussion on this, be sure to watch the video here.

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Have you applied for a loan and been denied recently? Do you know why? 

Share with a comment below.

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.
    Steve B. Investor from Centralia, IL
    Replied 9 months ago
    Great article, thanks Matt and stay healthy.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    You Too!
    Barry H. Investor from Scottsdale, AZ
    Replied 9 months ago
    MATT - Great recap of Balance Sheet and Agency lenders. I realize traditional lending was your focus here, but Seller-Financing is still available. Though not at rates like 4-6%, I offer Seller-Financing on my Turn Key remodeled rentals in Kansas City MO, with tenants already on-boarded. With 20-25% down, my financing produces 20%+ annual ROI for the Borrower / Buyer, inclusive of all Cap-Ex and loan costs. With no prepayment penalty, the Borrower can refinance anytime they like. Thanks again for the recap though. I was not aware of these internal workings of Balance Sheet and Agency lenders.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks Barry! I haven't done that many seller financing deals so it slipped my mind. I really appreciate you adding it to this conversation! Your terms sound solid on your deals also!
    John Bierly Rental Property Investor from Bainbridge Island, WA
    Replied 9 months ago
    Matt - very helpful article. I'm in the process of refinancing two properties, one for a loan of around 1M and the other at 2M. I'm using a commercial mortgage broker experienced in multifamily (who I've used in the past); I'd recommend anyone who is looking for a loan at this time do so as well. They have the relationship network with lenders that will allow them to get answers and find solutions, IMO well worth the 1% fee. After several weeks of hearing no or not now from lenders we now have a term sheet for 3.5%/5y/30y am for both (definitely helped by our 97% occupancy and 100% rent collection for April). One other point on lenders, our oldest is a SVP at Merrill Lynch and he told me earlier in the week that BofA (who owns Merrill) took all of the trainee financial advisors away from them and put them to work reviewing PPP loan requests. This is just one example of the enormity of the bailout and the amount of loan requests it has generated; it has forced lenders to redirect most of their resources to dealing with this need. The end result being that even if they were comfortable with RE risk as you discuss most of them wouldn't be able to service RE loan requests at this time.
    Olu Oyelade Rental Property Investor from Oakville, CA
    Replied 9 months ago
    Hi John , which lender gave you the new term sheet ? Thanks
    Steve Estle Financial Advisor from USA
    Replied 9 months ago
    John we don't charge any fees to explore our loan options if like second look at things...
    Olu Oyelade Rental Property Investor from Oakville, CA
    Replied 9 months ago
    I will DM you
    Daniel Tran Investor from CA
    Replied 9 months ago
    Hello John, I’m glad it’s working out well for you! Could you kindly share your lending source? Thank you
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey John! I'm glad you brought up mortgage brokers. I actually learned much of what I presented in the article and video from my mortgage broker. A good one is extremely knowledgeable and connected to current market conditions. They know who is offering favorable terms and who is restructuring at this time. I highly recommend using one, even if you've been in the game for a while. And you may be able to do better than that 1% fee if the loan is the size you are talking. And I love that you brought up the PPP program, this is completely clogging up many small banks right now, which are the ones that do balance sheet lending as I talked about.
    Joseph Scorese Banker from Philadelphia, PA
    Replied 9 months ago
    @MattFaircloth, I have to agree and disagree on some points since I am a Licensed Banker and have been interviewing all of the private lenders on my podcast, Guidelines have changed and additional information is required 100%. Employment W-2 and 1099 Documented income with a present P&L, and allowed to work as an essential business under the current laws impacting by state. What I can confirm, this no longer 'Amateur Night' for the grey area of lending and or NON QM Lending. Verification of cashed rent checks month of closing will be required to use rents in the equation and recognized rent collections for two years on personal tax returns to use rents on refinance or purchase scenarios. Also, the forebearance allowance being provided by lenders comes with a catch, the forebearance will not impact the borrowers credit but it does not allow the borrower to refinance and or purchase any other properties for 24 months from the forebearance( classified as a delinquency) under FNMA, FREDDIE AND GOV'T loans for now until the Government steps in and addresses. For the 680+ credit score borrowers there is real light at the end of tunnel presently and future.
    Axel Meierhoefer Rental Property Investor from Escondido, CA
    Replied 9 months ago
    @Joseph Scorese So basically you are making Matt's point. Any investor who has properties with non-paying tenants is basically removed from the market by the lender's requirement to not have any forbearance for new deals. In 24 months a whole new approach to lending will be in place and nobody will go to traditional lenders and banks anymore, especially when treated in the way you describe. Keeping cash and reserves in uncertain times and supported by the CARES act is a prudent business approach but lenders punish investors for it. I would not go back to those lenders.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks Joe and Alex! Joe, I believe you are agreeing with me more than you think here (wink). As I said in the video and article, the banks want to see income that will pay their loan. For an investment property, that income is first and foremost, rent. Yes, they will ask to verify and different banks will have different methods to confirm that income is stable. w-2 income for those that are not full-time investors yet is also also a source of income but not always required in my experience. Good point on the mortgage forbearance, those that either asked for it or are considering it from their lenders should know all the facts - how the deferred interest payments are being handled when they are paid back, and how it will be viewed in the future on new loan apps. I also think that it's too soon to say how forbearance will be viewed in the future. Banks will either view it as a blemish or they will see that the borrower did what they needed to do to stay out of default, stayed in communication with their lender, and kept their asset financially healthy. Steve, I concur that lenders that treat borrowers with too much scrutiny will have a hard time outliving that reputation once the dust settles.
    Genisha P. from Alabama
    Replied 9 months ago
    Matt, I am looking to purchase my first property and this read has been one of the most informative for me, as it relates to traditional lending. Thanks for sharing!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    You're welcome!!
    James Williams Investor from Simpsonville
    Replied 8 months ago
    Matt thanks for the education
    Danny Sai from FLORIDA
    Replied 9 months ago
    Matt, we interesting infom thanks
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks Danny, glad you enjoyed!
    Danny Sai from FLORIDA
    Replied 9 months ago
    Matt, very informative. It is great to learn about loans during Covid.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Glad you enjoyed Danny!
    Dan Butler from Memphis, Tennessee
    Replied 9 months ago
    Great post Matt! Very helpful
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks Dan! Glad you liked it and hope you are well!
    Steve Estle Financial Advisor from USA
    Replied 9 months ago
    Hey Matt, well put - thanks for taking time to put together. One thing I will say is cash & equity is king right now - I represent a corporate lending resource (25+ years in business) that does a variety of loans nationwide for business owners and real estate investors. We can directly access over 100+ different lenders across the country (some have dropped out of our network recently but others added so constantly moving...). What I will say is relative to our network of lenders, financing relative to construction and rehab is nearly impossible to come by without significant "skin in the game". Different markets have different appetites - one we very much like is Assisted Living Residences (ALR) - there are others. On the other hand, lending in general for refi / cash out is still very viable depending on a number of factors. So if struggling, we can potentially help as we can often do loans that most "traditional banks" won't touch. Reach out if anyone wants to explore further. Thanks again, Steve...
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks for sharing your experience Steve!
    Tim Silvers from Las Vegas, Nevada
    Replied 9 months ago
    Matt - In your opinion, do you see a rise in private and hard money lending in response to traditional lenders tightening underwriting guidelines or pulling back altogether?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey Tim, Great question. I think that Hard Money is going to come to the forefront for rehab and reposition, much more than it is now. That's one reason my company is gearing up to get into providing those types of loans and working with lenders that have a long track record of doing do. I also believe that private lending and private equity will become much more previlant while things shake out. Minor plug for my book Raising Private Capital there, LOL! www.Biggerpockets.com/privatemoneybook
    Andrew Postell Lender from Fort Worth, TX
    Replied 9 months ago
    Most of my posts here at Bigger Pockets have been clarifying lending rules so that regular investors know what to expect from lending. Lending and leverage are critical elements to a successful investor and for most of us it's hard to know what the rules are to lending. It's almost like it's a foreign language and there's very few places for us to go and study on how to translate it. And we are left wandering aimlessly hoping that some lender will help us....and when we find one that says "you can't do that" who are we to know differently? We just take their word for it and do our best. When I first became a real estate investors ALL banks told me that they could not help me what what I was doing....but now I know better. Some points of clarification with this article: 1. "The Gorilla in the Room" - Fannie and Freddie have NOT changed their underwriting requirements since Covid-19 has occured (with the exception of one small item for self-employed borrowers). Fannie/Freddie have NEVER had a blanket 6-18 months of reserves needed....and they don't now. And I think I can hear some of you thinking "I was told by lender X that I needed that much" and here's why lending rules get REALLY confusing - because of OVERLAYS. Overlays are rules that lenders put OVER the Fannie/Freddie rules. In essence, they are extra rules for the lender to be more conservative. Why would a lender every do this? Because investment properties foreclose at a higher rate than primary homes. So if I am a lender, maybe I want to limit my risk for that asset class. Especially if I am a larger lender. And even MORE especially if I am a publicly traded lender. That's why we preach about working with smaller, more local lenders because they have LESS overlays. There are plenty of real estate investors who don't need ANY reserves right now....because Fannie/Freddie don't require it for their situation...and because their lender does not require OVERLAYS. 2. Certain Banks - I certainly recommend for everyone to interview multiple lenders in their search. Certain banks are better for us than others. But right now, "balance sheet" or "commercial" or "portfolio" or whatever name you want to call those loans - are having a VERY difficult time. And this is because all of that money is out keeping businesses alive. Most of these loans are not in existence as of this date. Now I cannot speak for every lender here of course but this happens every time the economy shrinks. Ford and GM haven't made a car in 45 days....but they still have to make payroll. And make their loan payments. So they go out and borrow $10billion. And so does every other business that has had business suffer. Maybe you can find a 60% LTV commercial loan with a 8% rate right now....but most investors are having to wait for this type of lending to come back - and it will. But it will certainly be a while. There's lots of other lending questions that you can have answered in the Bigger Pockets forum if you would like to check them out. There's even specific forums for "Creative Financing" and "Private Lending" and so forth. There are a few of us that stay active there to help people know the right answers to these types of subjects. Thanks for reading!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks Andrew - I appreciate your clarifications, although I think that the information in the article still stands. If a borrower gets an Agency loan at this time they will be required to provide those escrows I listed, whether that requirement is from the Agency or the DUST lender, either way, it is there. But either way your post helped add even more clarity here, which I appreciate. Thanks!
    Andrew Postell Lender from Fort Worth, TX
    Replied 9 months ago
    Matt, very sorry, but there are many cases where borrowers do not have to provide money in escrow to get an agency loan with an investment property. It does happen often. It is important to target working with investor friendly lenders - a term not easily defined - but for most beginning investors, investors with 1 or 2 properties, the reserve requirement can be $0 or just a fractional small amount that is very reasonable and obtainable.
    Lisa Eckman Lender
    Replied 9 months ago
    Very helpful video and article. Thanks Matt.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    You're welcome Lisa!
    Wayne Smith Information Technology from Wilmington, DE
    Replied 9 months ago
    Love the article Matt! Wish you and Elizabeth well. Also, love the banter back and forth as we navigate this macroeconomic hurdle.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey Wayne! Thanks, we are doing great, hope you are also. Yes, the banter is where good conversations come up! Glad this article is generating some.
    Mark Johnston
    Replied 9 months ago
    Matt, Thank you for the information. We will be finishing up a repositioned asset in late summer. We will be 100% occupied and will have been seasoned for 8 months. The asset will be valued at 2 million. Is it possible to get a 80% LTV loan with a 1.3 - 1.4 DCSR? Or will we most likely be limited to a 75% LTV with a similar LTV. We would prefer a 30yr fixed however we need to refi by the end of 2020. Any suggestions or direction would be appreciated. PS The last 12 units we financed we did as residential mtgs. our rates ranged from 3.75%-4.5%. Are these rates available in a commercial loan product?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey Mark, You are going to be really well positioned. I can't say what terms you will get, there are a few really solid mortgage brokers who commented on this article so start with them! You should defintely shop it. Good luck!
    J Kearney
    Replied 9 months ago
    Very good clarification and information from Andrew Postell. I'm a direct FNMA FHLMC, GInnie lender for over 17 yrs. Basically it comes down to risk as to how much of a challenge it is to get a loan. Owner occupied, single family with W-2 borrower FICO 680+ is least risk. Self-employed, trying to buy investment property (experienced investor) more difficult, but doable. Everything else is on a case by case basis. We do have a few nonQM lending sources still ending also. As long as the numbers make sense, it's possible to get a loan.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks for your thoughts!
    Nic Cooper Rental Property Investor from SAN DIEGO
    Replied 9 months ago
    Awesome write up. You really distill what is important. Thank you!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    I try Nic! Thanks!
    Alex S. Contractor from Atlanta, GA
    Replied 9 months ago
    I realize most are talking about rental properties and refi on rentals, but what about new construction lending? I was in the middle of building some new construction and bam! I was told no more lending for new construction right now. I always start with my funds and then borrow the rest once construction has started, that shortens my time with borrowed money. Do you guys think that will open up anytime soon?
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    I have heard that there are some lenders already getting back into new construction. Shop around a bit and maybe call some of the mortgage brokers that commented here. Good luck!
    Tracy Brown Rental Property Investor from Sacramento, CA
    Replied 9 months ago
    Great insight Matt, Appreciate you taking the time to clarify the some banking distinctions. Thank you.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    You're welcome Tracy!
    Kevin Owens Lender from Phoenix, AZ
    Replied 9 months ago
    There’s some clarification needed. I’m with Berkadia and formerly worked at Freddie. Everything is specific to multifamily. Fannie/Freddie are not requiring 6 to 18 months of operating expense escrows. It is 6 to 12 months of debt service, taxes, insurance and replacement reserves. The varying categories of these escrows changes between Fannie and Freddie and leverage points in the deal. There are exceptions for student. Warehouse lenders linked to the CLO market have dried up because buyers of loans in these credit markets don’t know where to price their spreads and credit lines offered by the street have been shut off to reduce exposure. Most CMBS lenders are on the sidelines and recent issuances hitting the street have been ugly. Regarding Fannie/Freddie, all direct license holders (Berkadia included) are transacting on agency debt. Added to this mix are life insurance lenders (read balance sheet) who very much want to lend on low leverage deals that fit their criteria. Credit markets for storage and multi are strong, and nearly shutoff for retail and hotel.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks for the clarification Kevin!
    Elaine Bright Lender from Nashville, TN
    Replied 9 months ago
    0As a private money broker my lenders for non-owner occupied properties have more money than deals but with COVID uncertainty they have made the box smaller for deals they will risk lending on and the numbers have to be such that it is good deal for all parties. No longer looking to loan to commercial or multi-family and will not lend on deals over the FHA cap for the area. But are they are still doing lending for those with bad credit as long as currently showing they are paying bills and any bankruptcy is resolved over 2 years ago. But still need to have some skin in the deal. Their lending box has gotten smaller and more specific with the Feeling that COVID has shown that -commercial properties like offices can be smaller if people work from home. Brick and Mortar stores may not survive unless they are able to pivot to online shopping and use local delivery options. -multi-family over 4 units...Those in apartment complexes are realizing their place is to small and will be soon looking to get out to a SFR rental or buy. Don't forget there is always creative financing with a money partner or owner financing.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hi Elaine, As you said you were a "private money broker" I'm assuming you meant hard money and bridge loans? I left that out of the article and video to keep things simple but glad you elaborated here.
    Doug Phillips Rental Property Investor from Cincinnati, OH
    Replied 9 months ago
    Great article Matt, thanks for the write up. Would these tenants also apply to SFH lending? My soon to be wife and I are planning to buy our first home this year and wasn’t sure if this article was mainly geared toward commercial assets.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey Doug, Owner occupied property rules are completely different, and I've heard still very friendly. I'm assuming you are talking about an owner occupied SFH, if you are looking at a rental house the "balance sheet" conversation would apply to you. Matt
    Jamie DeRossett Investor, Contractor, Appraiser for Real Estate Appraiser from Lexington, Kentucky
    Replied 9 months ago
    Those are certainly good points and hold true in any market I would think. I think it is based on geography. The market where I am at is still booming and it is very easy to get a loan and lenders are ready and willing to lend. I did see a small drop in volume last month and the begining of April, but things have picked up back to normal and my wife who is broker and her agents are all very busy. So here in Kentucky luckily we have seen the loan market dry up any. With money down and good credit you can buy all day long everyday. We even have lenders who loan with bad credit if you havr a big down paymnet.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Yes, everything in real estate is market specific. I'm guessing you are dealing with local banks when you say they are ready to lend. The article and video would apply to more national lenders. Glad to hear that our friends in Lexington Kentucky are doing well, we have several complexes there. Love that market! Matt
    Revedy Black Investor from Nashville, TN
    Replied 9 months ago
    Wow. It's going to be very interesting to see how long it takes the market to rebound and to what degree future interest rates will affected.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Agreed! What the rates will look like in the future is a big question. Personally, I think they will stay down because the Fed has no recoure to raise rates right now.
    Norman T Eng
    Replied 9 months ago
    Nice article! I also read an article today that the Fed did a margin-call on lenders in mid March. They did a little too much and put lenders in a bind. https://finance.yahoo.com/news/dirt-cheap-u-mortgages-thwarted-133800011.html
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Thanks for sharing, I will take a look!
    Rajneesh Jha Rental Property Investor from Lehigh Valley, PA
    Replied 9 months ago
    Hey Matt- Long time no talk. Excellent points and thanks for distilling so much of good information succinctly. Very helpful. I appreciate it. Raj
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    Hey Raj! Glad you liked it! Hope you are well. Thanks again for the nice wine you sent, I hope you are still thriving up the Lehigh Valley!
    Karen Schimpf Lender from Nat'l Commercial Mtg Lender - Round Rock, TX
    Replied 9 months ago
    Matt, Great article. I will add though, many of the balance sheet lenders are getting sucked up into participating in the PPP loans and are not financing currently outside of that realm.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 9 months ago
    You are right about that Karen. Many of them don't have staffing for anything else aside from PPP applications right now. If that's the case, move on to the next lender.
    Dalia D. Real Estate Broker from Bellingham, WA
    Replied 9 months ago
    Thank you Matt for the very informative, up to date and animated presentation addressing the current lending situation.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 8 months ago
    You are welcome Dalia!
    Luis Rivera New to Real Estate from Puerto Rico
    Replied 9 months ago
    Thank you for sharing this article with us! Personally, I can't use any of this information right now since I'm very new to the realm of REI but my knowledge has grown a lot! I can also say that the comment section is also very useful! So many experts that have worked in highly prestigious companies!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 8 months ago
    Hey Luis, It's all good, you are in the "learning" phase. I spent a year learning before my first deal. Just absorb as much as you can, and jump in soon, don't get paralysis by analysis. Best of luck! Matt
    Jean Santiago New to Real Estate from Chino Hills CA
    Replied 9 months ago
    Great article, really good read on updates of the current market!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 8 months ago
    Thank you Jean!
    Tomer Versano Investor
    Replied 8 months ago
    Thanks Matt! Good stuff.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied 8 months ago
    Thank you!
    Juan T. Investor from East coast
    Replied 8 months ago
    I read you a lot Matt. You always are on point, and show that you made your bones in RE long time ago, talking always from experience. I can tell you that in my case it helps a lot reading your articles. About the situation, IMHO it all comes down to be realistic and pick up your battles. I do believe that lenders right now are gonna have more overlays, the biggest borrowers right now are business owners that cannot operate because the quarantines. Now, if you have your proper reserves, you are not too much leverage and you have a track record with your lender, chances are you will get what you need. The banks do their own " screening" as landlords do their own "screening" for prospect tenants. If a landlord do not see it everything clear with a prospect tenant, it will move on to another tenants with more guarantees. Lenders is the same , period. Nothing personal, money have no friends, it never did and t never will. Better take a rejection as part of the business and keep looking or wait that the country opens fully again. Banks knows that this is just the beginning and a new recession is coming. People will lose jobs, people will default loans, and a lot of tenants will be behind their rents, and it can be very nasty for some time. Investment properties are the first ones usually to be in trouble. It is what it is. Thank you so much Matt for your insight. "A bank is a place that will lend you money if you can prove that don't need it" Bob Hope
    Tommy Adeoye Investor from St Louis MO
    Replied 8 months ago
    You hit the nail with this one.