If you are interested in purchasing Property Owned or short sale properties, then you must know the basics of transactional funding and proof of funds letters and exactly how they relate to your real estate property interests and activities. Essentially, the transactional funding refers back to 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. Evidence of funds letters are used to help secure financing and smooth the way for real estate transactions you are involved in.
Transactional Funding. Using transactional funding allows the short sale process to take place smoothly. The essential premise for the loan is the fact that once the original owner is ready to sell as well as the buyer is able to take over the property (usually having a standard mortgage), there exists a short term loan required to facilitate the transfer period. Because of this the how transactional funding works is a loan that exists for just a few hours, before being recovered if the final house owner will pay for the property.
Both separate transactions that place on the day of settlement create a unique situation known as the double closing. Lenders like these loans as the lending period is usually just a few hours. If the transactional funding lender helps to ensure that the rest of the financing for the transfer of the property is at place, this will make this short-term loan deliver a fairly low risk chance for a profitable outcome through the provision of the short term loan.
Transactional funding works not only for your short sale scenario described above. A savvy investor can structure utilizing a short term loan to simply carry out purchases of real estate owned (REO) properties, or some other real estate property transaction which is based upon a double closing.
Evidence of Funds Letters. When buying property, the customer must provide some form of evidence they may have the funds to cover the house acquisition – here is where a evidence of funds letter becomes useful. This document that the investor can use to indicate to the parties involved in a real estate property transaction which you have pre-capable to purchase real estate.
The proof of funds letters are utilized to demonstrate that investors hold the financial resources or means to fund a home transaction. They indicate to the other parties that your particular funds are legitimate and can be used the purchase of the property. This sort of document is extremely useful if you are involved with short sale transactions and REO purchases which are structured having a double closing or when using transactional funding. They can also be used for other transactions which require documented evidence of your financial resources.
The biggest problem that many real estate investors face whether it is their first deal or their 100th is capital. Even if you have a significant amount of savings it isn’t going to cover all of the deals you should do and means potentially risking your precious nest egg you have worked so desperately to develop. Obviously we don’t really even have to mention how difficult getting a conventional mortgage is these days. So how will you really by homes with nothing down and find usage of a lot of cash so that you can start flipping plenty of houses? Well, for a long time those who have been making the true money from real estate investing have used transactional funding.
CNBC recently reported a narrative on how transactional funding has risen in popularity and it has become virtually important for any investor seriously interested in flipping plenty of houses and carrying it out quickly. You will find endless opportunities available for investors from pre-foreclosures to short sales and from HUD homes to REOs. There are also far more buyers available than it may seem too. The problem is having the capacity to purchase these bargain priced homes at big discounts then flipping them for any higher price. The beauty of transactional loans is that it offers a temporary bridge loan for you to acquire these homes and then sell them for big profits.
Exactly what are the specific benefits of transactional lending for investors and how can this compare with acquiring a regular mortgage? The very best transactional funding sources will fund the entire purchase price, plus your closing costs providing you with already have secured an experienced buyer to resell it to. Even better, lenders providing transactional funding don’t even care about LTV, how much cash you have inside the bank, what your credit looks like or even exactly what the appraisal appears like. As long as you come with an mmchsm buyer they are going to loan you the money you should close to get a small fee, and normally transactional funding can be closed on within 3-5 days!
The evidence of funds letter is generally provided as being a bank, security or custody statement, stating the investor or property buyer has funds for the real estate purchase that are obtainable and legitimate. Applying this letter, the purchaser/investor will be able to secure any necessary additional funding or even to assure the owner that they have the means to fund the real estate purchase.
To accomplish success in real estate investment, it pays to completely understand the different options accessible to you and ways to utilize them to maximum advantage. Transactional funding and using proof of funds letters are two added ‘tools’ within your investment toolkit. Once you understand how these financial opportunities can be used to the best advantage, you’ll be on track to achieving financial security through property investment.