The Mortgage Application Process: 5 Steps with 5 Arch Funding

Posted by Elizabeth Millard on November 23, 2015

When it comes to mortgages, you have a number of lenders you might choose. But if you whittled those options down to companies founded on the tenets of simplicity, flexibility, and reliability — and then only considered those with a comprehensive approach to credit decisions instead of focusing solely on collateral — just one name would remain: 5 Arch Funding.

Another factor that sets 5 Arch apart is its straightforward approach to mortgage applications. Here’s the handful of key steps to determine if you’re in a position to begin the process:

1 – Experience

If you’re seeking “fix and flip” financing, you’ll need to show a list of previous flips you’ve completed. Similarly, if you’re seeking rental property financing, you’ll need a list of rental properties you currently own or have owned in the past.

The experience component can be crucial, says Gene Clark, president and chief legal officer of 5 Arch Funding: “Our goal is to see properties successfully flipped and rental properties successfully managed for passive income.” For that to happen, applicants often need more than equity, they need experience of successful execution of flips or rental management.

2 – Character

Make sure there are no outstanding liens or judgments at the time of application. Also, 5 Arch lends to professional investors who have not experienced bankruptcy or foreclosure action in the last three years. For rental property financing, 5 Arch requires two years of tax returns paid by the borrower and the guarantor.

3 – Collateral

Check to make sure your investment property is classified as residential, with one to four units, and not located in a rural area. Also, you should ensure there’s no structural or environmental issues. If you’re flipping the property, it should be worth at least $100,000. For rental property, the value should be greater than $50,000.

Traditional lenders typically focus solely on collateral with credit decisions, and to compensate for risky loans, they tend to charge two to four points and higher interest rates. Clark says, “In contrast, 5 Arch takes a more comprehensive approach toward making a credit decision, and as a result, is able to serve its clients with minimal points upfront and much lower interest rates.”

4 – Capacity

If you’re flipping the property or renovating it for rental income, prepare an itemized renovation budget. For rental properties, you should be able to speak about how management will be handled, either by you or a management company.

5 – Exit Strategy

If you’re flipping the property, it’s important to note if your final value will be realistic, given the surrounding neighborhood. For a rental property, you’ll need to articulate how local market conditions and job growth will support a continued rental market.

“We are committed to building relationships with experienced residential investors, and rewarding their experience with low rates and points,” says Clark.

If you’ve already flipped at least two properties in the last 12 months, or have owned and operated rental properties for more than a year, you’re already well on your way to working with 5 Arch Funding.

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