Mortgage & Commercial Lending News.

Private hard-money lenders have been a significant financing force behind the Fix-and-Flip (F&F) business model, which has risen to prominence among real-estate investors during the past 10 to 15 years. Yet, given the hefty increase in mortgage rates during 2022, and a somewhat cooling housing demand, real estate investors might be hesitant about starting an F&F process during 2023.

Many of our potential and current clients have asked us (far too many times to remember and count): “How can I save enough for a downpayment?” The first answer that always comes to mind is: “through savings discipline and financial planning.” As one of Houston’s premier private residential lenders, and native Houstonians, we know and have witnessed how hard it is to earn enough money to make a decent living in our city, let alone to save for a mortgage downpayment. Dedicating part of their earnings to the future and the unexpected is even more critical for most people. So, we thought that we could give some pointers as to how you could save enough for a downpayment.

AMI Lenders finances business purpose loans and consumer loans, both guaranteed by real estate. So, we consider it a good idea to summarize the differences and commonalities between these two types of loans for the benefit of our clients. 

The vast majority of Americans tend to consider banks to be the “go-to place” to obtain financing. If a businessman needs a multipurpose line of credit for their day-to-day operations, or a working capital loan, or a loan to acquire a specialized piece of equipment, or maybe a young entrepreneur is looking to start a new business, they will most likely talk to a bank about obtaining a business purpose loan. The same goes for a young adult or a head of household looking for an auto loan, or a loan for purchasing a new appliance to replace a broken one, or just looking for the benefit of having a credit card: they will usually talk to the bank in which they have their savings or checking account.

You will have noticed that when applying for a loan with almost any financial institution or hard money lender in the US you will be asked for the purpose of the loan. Some borrowers know why that’s important, but some others do not. Moreover, some of our loan applicants do not believe it is any of our business to know on what they will use the money! Because since all our loans are guaranteed by real estate, they think we are being too nosey.

You've likely noticed the flood of negative headlines about the real estate market. Higher mortgage lending rates, market volatility, and uncertainty are certainly having an effect. However, experienced private mortgage investors (not unlike many of AMI Lenders’ clients) know that real estate investment opportunities are still available.

Many people have no idea how much demand there is for the services of hard money lenders. However, statistics show that the United States generates more than $570 billion yearly in real estate loans and collateralized debt! More than 548,000 people around the country are employed to provide for all the demand for such loans.

Have you ever heard the expression “Asset rich, cash poor” or alternatively “House rich, cash poor”? It is used to refer to persons who are not “poor” in the strictest sense of the word because they own valuable assets (such as a nice house with a swimming pool, two brand new cars, big screen TVs, expensive furniture, among other things) but who can be, at some moment in time, in a situation where the cash they have available is not enough to cover their cash flow requirements. In the lingo of realtors, bankers, and private mortgage lenders, someone who is “House rich, cash poor” is abbreviated by using the term “House Poor.”

 In a previous entry Is it still a good time to buy a house in Houston? A Hard Money Lenders' Perspective investing in real estate in Houston, we stated that the US economy is facing complicated macroeconomic forces. This statement has been proven true once again in the past few days.

Maybe your brother-in-law, next-door neighbor, or a colleague at work, has told you that the real estate market "is going down the drain." They probably said to you that mortgage rates are at "unpayable levels" and that one of the following is going to happen: recession, lack of buyers, loss of equity as home prices fall, higher interest rates, and lack of lenders, among many others.