When dealing with lenders to obtain financing for your clients, it's essential to know the rules that govern loan approvals. These rules are a starting point, providing consistency in decision-making. However, experienced brokers and wholesale lending partners realize that not every deal can be placed in a box. That's where knowing lender flexibility, workarounds, and exceptions can make you stand out in delivering value to your clients.
The skill to navigate these subtleties can be a deal-maker. If a lender is open to thinking outside the box to close a deal, it's a good indication they are a good long-term partner. At RCN Capital, we understand each loan situation presents a distinct set of circumstances, and we take the time to collaborate with our third-party originators such as mortgage brokers, private money lenders, and referral partners to craft deals that serve the needs of the client.
Let's get into some of the most important workarounds and exceptions that will enable you to close more deals and have better relationships with your clients.
One of the initial challenges in obtaining financing is the requirement for credit scores. Although most investors believe they need to meet the lender's minimum FICO score themselves, as a broker you are aware that having a co-borrower with a better credit profile can significantly enhance the terms of the loan.
For example, RCN Capital's extended loan program offers a substantial variation in loan conditions between a 640 and a 720 FICO. The difference might be a 15-20% variation in LTV and considerably lower interest rates. That's a big plus for your customers, making their transactions more profitable in the long term.
Additionally, a co-borrower with more solid financial credentials can provide an entry point into more advanced forms of financing, including heavy rehab loans or ground-up construction. Not only does this broaden the client's opportunities, but it also provides better chances for repeat business on your part as a broker.
Key Takeaway: Encourage your clients to consider co-borrowers strategically, not just for eligibility but to secure better rates and terms. This is especially useful for first-time investors or those looking to scale their portfolios quickly.
Most borrowers naturally think of refinancing when they want to extract equity from a property. But as a private lender or mortgage broker, you can add value by teaching them the benefits of a delayed purchase instead.
A delayed purchase can be especially useful when working with fix-and-flip investors or auction purchases. Rather than refinancing, cash-paid borrowers can obtain a loan three months after the purchase to have access to more leverage.
Whereas refinancing usually is not available without stringent seasoning conditions, a delayed purchase permits investors to withdraw capital nearly instantaneously—enabling them to reinvest more quickly. At RCN Capital, we actively counsel our wholesale lending partners on when a delayed purchase is the more intelligent choice, maximizing deals.
Key Takeaway: Educate your clients on the advantages of a delayed purchase over refinancing, particularly when speed and leverage matter. It’s a great strategy to help them scale quickly while keeping capital fluid.
For brokers who deal with customers who have several properties, portfolio loans can prove to be a goldmine. Not only do they facilitate financing by bringing several properties under a single loan, but they also minimize closing costs, make payments easier, and, in most situations, enhance general loan terms.
But the secret to putting together a solid portfolio loan is understanding which properties to include and exclude. There are some properties that will harm the overall performance of the portfolio, impacting LTV and interest rates. We review each property in the portfolio separately at RCN Capital to make sure it adds value to the deal.
For instance, whereas our basic minimum value for long-term loans is $100K, for portfolio loans, we accommodate as low as $75K in properties—assuming the average value of the portfolio is still higher than $100K. This helps brokers accommodate loans that may not otherwise qualify under normal rules.
Key Takeaway: Work closely with your lender to determine which properties should be included in a portfolio loan. Excluding underperforming properties can lead to better overall leverage and lower interest rates for your client.
Aside from these organized workarounds, seasoned brokers realize that each transaction is a one-off. Knowing possible exceptions can be the difference between a rejected application and a closed loan. A few of the most powerful exceptions to keep in mind are:
Key Takeaway: The more you understand a lender’s flexibility, the better positioned you are to structure deals that work. Always ask about possible exceptions when reviewing loan scenarios.
As a third-party originator, your efficiency in closing deals is what differentiates you. Working with a lender that values creative solutions and flexibility eases your work and enables you to better serve your clients.
At RCN Capital, we are committed to working hand-in-hand with our wholesale lending partners to identify the best financing solutions. Whether it’s adjusting loan structures, finding workarounds for unique situations, or offering competitive exceptions, we go the extra mile to ensure you can close more deals.
Stay tuned for Part 2, where we’ll dive into additional strategies to help brokers and wholesale lending partners navigate lender guidelines effectively!
If you're looking for a lending partner that prioritizes your success, RCN Capital is here to help. Connect with us today to discuss our real estate financing solutions and how we can help you grow your business.