If you are considering purchasing Real Estate Owned or short sale properties, then you must know the basic principles of transactional funding and evidence of funds letters and how they relate to your real estate interests and activities. Essentially, the transactional funding means the funds borrowed for a very short period to transfer a property from the current owner, to the transaction coordinator, then to the new owner. Proof of funds letters are used to help secure financing and smooth the way for real estate transactions you are involved in.
Transactional Funding. The usage of transactional funding allows the short sale process to happen smoothly. The essential premise for your loan is the fact when the original owner is ready to sell as well as the buyer is ready to take over the property (usually using a standard mortgage), there exists a temporary loan required to facilitate the transfer period. This means that the best transactional funding lender is a loan that exists just for a few hours, before being recovered if the final house owner will pay for the home.
Both separate transactions that place on the day of settlement produce a unique situation known as a double closing. Lenders like these loans because the lending period is normally just several hours. If the transactional funding lender helps to ensure that all the other financing for that transfer in the property is within place, this makes this short-term loan deliver a relatively low risk chance for a profitable outcome from your provision in the temporary loan.
Transactional funding works not only for your short sale scenario described above. A savvy investor can structure the use of a short-term loan to easily carry out purchases of real estate property owned (REO) properties, or any other real estate transaction that is based upon a double closing.
Evidence of Funds Letters. When buying property, the purchaser must provide some form of evidence that they have the funds to protect the home acquisition – this is when a evidence of funds letter becomes useful. This document that this investor may use to indicate to the parties involved in a real estate transaction you have pre-capable to purchase the real estate.
The proof of funds letters are used to demonstrate that investors have the financial resources or means to fund a home transaction. They indicate for the other parties that your funds are legitimate and can be used purchasing the home. This sort of document is extremely useful in case you are associated with short sale transactions and REO purchases which are structured with a double closing or when utilizing transactional funding. They may also be used for other transactions that need documented proof of your financial resources.
The biggest problem that a lot of real estate investors face whether it be their first deal or their 100th is capital. Even if you have a lot of savings it isn’t planning to cover each of the deals you want to do and means potentially risking your precious nest egg which you have worked so difficult to construct. Needless to say we don’t really even have to mention how difficult obtaining a conventional mortgage is these days. So how can you really by homes with nothing down and locate access to plenty of cash so that you can start flipping plenty of houses? Well, for many years individuals who have been making the actual money from property investing have used transactional funding.
CNBC recently reported a story regarding how transactional funding has risen in popularity and has become virtually important for any investor interested in flipping a lot of houses and carrying it out quickly. You will find endless opportunities on the market for investors from pre-foreclosures to short sales and from HUD homes to REOs. Additionally, there are a lot more buyers available than it may seem too. The problem is having the capacity to buy these bargain priced homes at big discounts and then flipping them to get a higher price. The advantage of transactional loans is it provides a short term bridge loan so that you can acquire these homes and sell them for big profits.
What are the specific advantages of transactional lending for investors and how performs this compare to acquiring a regular mortgage? The very best transactional funding sources will fund the complete purchase price, plus your closing costs providing you have already secured a qualified buyer to resell it to. Better yet, lenders providing transactional funding don’t even value LTV, how much cash you may have in the bank, what your credit looks like as well as exactly what the appraisal appears like. As long as you come with an mmchsm buyer they will likely loan you the money you need to close to get a small fee, and normally transactional funding may be closed on within 3-5 days!
The evidence of funds letter is generally provided as a bank, security or custody statement, stating that this investor or property buyer has funds for real estate purchase which are obtainable and legitimate. Applying this letter, the purchaser/investor is able to secure any necessary additional funding or to assure the owner that they have the means to fund real estate purchase.
To achieve success in real estate investment, it pays to fully comprehend the different choices open to you and ways to make use of them to maximum advantage. Transactional funding and the usage of proof of funds letters are two added ‘tools’ within your investment toolkit. Once you know how these financial opportunities can be used to the best advantage, you’ll be on course to achieving financial security through real estate investment.