Real Estate Investors: Why You’re Getting Denied Financing (And How to Fix It Fast)

💰 Real Estate Investors: Why You’re Getting Denied Financing (And How to Fix It Fast)

Are your deals getting denied even when they look like winners on paper?

You are not alone. More importantly, you are probably not the problem.

In this powerful episode of The Real Estate Deal Room, Mortgage Strategist Ebonie Beaco breaks down what most lenders will not tell you. You will learn the real reasons investors get denied financing and how to fix it fast before you lose your next deal.

🔥 Inside this episode, you will discover:

•  The hidden deal killers lenders look for including DTI, reserves, and deal structure 
•  Why cash flow alone does not guarantee loan approval 
•  The difference between traditional lending and investor-friendly financing 
•  How to structure your deals before submitting offers 
•  What lenders are really thinking when they review your file 
•  How to position yourself like a serious investor that gets approved 

If you are a real estate investor, wholesaler, landlord, or short term rental owner, this episode will change how you approach financing.

Because the truth is simple
 👉 Deals do not get denied. Poorly structured borrowers do

Once you understand how to structure your deal the right way, you stop getting denied and start closing 💼💰

Ready to get your next deal approved instead of denied?

📲 Schedule your 1 on 1 strategy session:
 👉 https://calendly.com/homeloansnetwork

Do not submit another offer without a strategy.

🎙️ Subscribe to The Real Estate Deal Room for real deal breakdowns, investor financing strategies, and insider lending insights that help you close more deals and scale your portfolio faster.

📲 If you want help structuring your next deal, send me a message or schedule a one-on-one at HomeLoansNetwork.com

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Finance Smart, Invest Smarter, and I’ll See You At The Closing Table.

Ebonie Beaco - Mortgage Strategist & Sr. Loan Officer

PH:12-392-0664

Home Loans Network Powered by Loan Factory (NMLS: #2389954)

Licensed in: Alabama, Arkansas, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Missouri, Virginia

Transcript

SPEAKER_00 0:00

Welcome, welcome, welcome everyone, back to the real estate deal room. This is where real deals get broken down, real strategy gets talked about, and how you actually learn how to get to the closing table. So whether you're a realtor or a real estate investor, this particular podcast is for you. I'm your host, Ebony B. Co. Mortgage Strategist, and today I am going to talk about something that a lot of real estate investors don't want to admit. You're not getting denied because the deal is bad. You're getting denied because the deal is structured wrong. And this is where I come in at to help you understand how to fix a deal early on in the deal. Or if you're working with, let's say, um, not just a real estate investor, but but you're working with a mortgage loan officer, you're a financing person, do they know how to structure this deal? So if you can be ahead of them when it comes to structuring the deal, then you know who can do what they can do for you. So if you do not know what's going on with your deal and you're just picking any loan officer, you're gonna keep losing deals, wasting time and burning opportunities and losing earnest money. So today I'm going to break down the real reasons investors get denied, the difference between traditional lending and investor-friendly lending, and how to structure your deals before you even submit an offer. With that being said, let's get into it. So let's talk about why investors actually get denied. So let me be real with you. Most investors think if it cash flows, I should get approved. And wrong. This is not how lenders look at it. This is not how they look at the deals. Here's what lenders actually look at. They go behind the scenes, right? Think of this as a movie. Scene one is the debt to income ratio, DTI. This is one of the biggest scene killers. This will kill your deal. If your monthly debts are too high compared to your income, the lender doesn't care about how good the deal looks. Instead, they're just gonna freaking deny you. They don't care about that. This is not no DSCR loan, and even if it was, it's not even about this. How this deal is a whole is structured. And a lot of investors don't realize your personal debt still does matter, even on investment deals, depending on the loan type. Now, here's the scene number two: the reserves. This is huge. Reserves means how many months of payments do you have after the closing? Most lenders want to see three to six months minimum reserves, sometimes more for investment properties. But let me tell you this. I have a lot of lenders who are okay with two months' reserves, but it's for residential properties, it's for owner-occupied properties. So properties is one unit, two unit, three, maybe four, anything over that. No, you're gonna need that three to six months. So, because this podcast is specifically for real estate investors and my realtors, three to six months, that's the lucky number that your client should have in the bank as a reserve. And the reserves is basically what the monthly mortgage payment is with the taxes and insurance. Okay, so three to six months of that. If you're a real estate investor, remember what I just said three to six months. Don't I don't want to hear about well, the seller's gonna contribute towards a closing cost. They don't care about the seller's gonna contribute towards a closing cost, they don't care if there's any type of um unique grants for real estate investors. It doesn't matter. What matters is you have skin in the game, and that skin in the game is that three to six months of reserves in your bank account. Now, if you're putting all your money into the deal, that's a red flag too. Now, scene number three, see you prepping up, right? Like you're you're you're studying everything, you're rehearsing. Well, that's the deal structuring. This is the one nobody ever talks about. You can have the same deal and get approved or denied based on how it's structured. That's the purchase price, the down payment, the loan type, the income strategy. See, all of that matters. Now, I need you to understand this, and I'm gonna repeat this the purchase price is important because, see, that's part of your debt to income ratio. The down payment is important because that's part of based on your debt to income ratio making in the loan program, that's the loan of value. So you need to have the difference between the purchase price and the loan amount as well as the closing cost. You add that up, guess what? You need to have that down payment. Your loan type is important because your loan type is gonna play a part as to the structure type, the loan of value, LTV, and your interest rates. So a lot of times from realtors, I get, oh, what is the terms that I can get for my client? I can't tell you that without this basic information. And this is good for realtors to know, so they're not wasting their time with quote unquote investors that's not real real estate investors, because real real estate investors who were taught properly and who's been doing this and whether they learned by through failure, because I always say failure is the best way to success. You know, if like my mother always told me, if at first I don't succeed, try, try, try again. So when you're consistently learning or making mistakes, you're constantly learning because no one is going to be stupid to keep doing the same mistakes, I would hope. So, again, the purchase price, the down payment, the loan type, the income strategy, all of that matters. Now, let's look at traditional versus investor-friendly lending. Let's clear this up because this is where a lot of people go wrong. See, traditional lending, that's like you go to your banks, your credit union, and the conventional loans. That is not gonna help you when you're looking for investor-friendly type loans under no circumstances. Because, see, traditional loans are going to look at your income, your W-2, your tax returns, your DTI, your credit profile. Problem is, this doesn't always work for real estate investors because a lot of real estate investors, believe it or not, are self-employed. And let's say you're a real estate investor who is a doctor, and let's say you do make $300,000, and that seemed great, right? Prior to you getting into real estate investment, you more than likely have a nice lifestyle and bills, and maybe possibly student loans still. Okay. With that being said, that debt to income ratio is really, really high based upon your current lifestyle. However, here's a however, you purchasing a three-unit building may not help you. You purchase in a six-unit building. It's a possibility. You're purchasing a 12-unit building, that can help you because every single door, which means unit, that is inside of that building adds to your income. So, again, when it comes to traditional loans, that you cannot qualify with generally. When it comes to investor-friendly loans, that's a whole nother story in itself. Because, see, investor-friendly lending, this is where deals actually get done, especially if you have a lot of creative income and tricky income. This includes the DSCR loans, which is the debt service coverage ratio loans, and that is basically what I just kind of mentioned before. You have a 12-unit building. Um, the person may not qualify with their traditional tax return of W-2s, but they can qualify adding keyword is adding the income of the building, adding the future income and revenue of the building that they are purchasing. Bank statements loans. Well, bank statement loans basically you're saying, you know what? I'm not gonna lie to you because I want to really want to pay Uncle Sam, but you're saying this in a nice professional way. Oh no, I don't have 24 months bank statements that I can, I'm sorry, I don't have um two years tax returns that I can give you. You do, but here's a catch. More than likely, you'll probably say you make $75,000 a year. Why? Because maybe you made $800,000 a year. By the time you were done, you turned around and wrote off everything. Once you wrote off everything, by the time you was done, it only looked like you made $75,000. Can you buy this building for $2 million? Absolutely not. However, that same money that you was making was going into your bank account and that shows consistent deposits, right? In that particular case, then we'll say, okay, you know what? Give us 12 to 24 months of bank statements. That 12 to 24 months in bank statements, we use all the deposits. If those deposits come up to a nice number that will help your debt to income ratio, bingo, you and quality qualifies for this investor-friendly loan, which you would not have had qualified should you went to a traditional bank and lender. I understand we all are faithful and loyal to our banks and our credit unions, but they are not the ones that's getting ready to get you this big real estate investment property you're trying to get or short-term rental investment property. And when I say short-term rental, maybe you are a real estate investor who's looking to purchase a property for the purpose of an Airbnb. That's that's called STR, short-term rental. The other type of investor-friendly lending is asset-based lending. Once again, it's pretty much the same thing. You have proof that you have all of these assets, you have other properties, and I don't mean cars, other real estate properties, as well as, like I said, the bank statements. You could put all of this together to show I have money coming in. This building over here, 123 Main Street, is bringing in $50,000 a month. No, it's not on the tax returns, but I can prove based upon the rental deposits that are coming in through my corporation, and I own this corporation that shows that this money is mine. Now, when it comes to the investor-friendly lending, they focus uh mainly on the property's income, the deal's performance, and the strategy. Meaning, you know, when it comes to strategy, what's the goal? What's the end game? Are you gonna keep it? Is it gonna be um a fix and flip? Is it gonna be a situation whereas you're gonna turn a building into um a profit, right? And what I mean by that is you're gonna take a vacant building, you're gonna do some rehab, and then once you do the rehab and do the renovations, you're gonna refinance it for the purpose of doing what? Putting tennis in there, and now you have a performing space building. The building is performing with the red. Now, they're gonna ask this right here. So they're gonna want to know, can you afford it? But instead, if you asking yourself, can you afford it, they're really gonna be asking, does the deal make sense? Okay. Now, how you structure the deals before you submit the offers. Now, this right here is where you separate yourself from everybody else. If you're out here submitting offers without talking to a lender first, without having your pre-approval, shame on you. Shame on you for wasting your time and shame on you for wasting that realtor's time because you're already behind. Somebody else can already beat you to the deal. Here's what you should be doing now. Know your numbers. You need to know your numbers first, know what you qualify first before you even look at a property. Know your credit range, know your monthly debt, know your actual income, not what you think it is, but your actual income. Then from there, you want to get your deal pre-structured, not just pre-approved, but a pre-approval is basic. That doesn't mean anything. What you really need is your deal structure, structured the right way, because it being structured the right way is gonna make sure that okay, getting approved is one thing in the end, but can you even get to the closing table? And when you get to the closing table, can you actually close? Like, do we have enough money here? So the deal needs to not just be um pre-approved in a sense for financing and getting approved, it needs to be pre-structured. You need to know how the strategy of this deal is gonna work. So, what that means is what loan is gonna fit best for you, how much you need to put down, what terms give you the highest chance of approvals. From there, you, Mr. and Mr. Real Estate Instor, are gonna analyze that deal like you are a lender. Don't just ask yourself, will this make me money? No, ask yourself, will this get approved? That means looking at the cash flow, the rental projections, the expenses, and your exit strategy. Because the lender is always gonna want to know, especially when you're looking at a lender for the purpose of getting um the investor-friendly lending, they're gonna want to know, is this particular deal, do you have an exit strategy? This is important. One of the most important things after you do all of that, or even before you do all of that, is get you a power team. Get you a lender like me, a mortgage strategist, mortgage loan officer like me. I'm not necessarily saying mean, but when I mean like me, they need to know their stuff. They need to know in advance this deal needs to be pre-structured, not just pre-approved. Who gives up about a pre-approval when a deal is not even structured correctly? Because a pre-approval does not get you to the closing table. A pre-approval may get you inside of the lender, it may get your deal approved, but it's going to be subject to a thousand and fifty-five conditions. And conditions, you don't want a lot of those because you have to satisfy those, and conditions don't mean an actual approval. So you still at the pre-approval stage. You're approved, subject to all of these conditions, okay? You want to make sure you're working with a realtor who understands real estate investors. You need to make sure you have a strategy before you write your offers. If you have a good team, you can honestly, like I'll give you good examples. I have realtors all the time that say, Hey, Ebony, I got a client who wants this deal. Here's their information. You think you can possibly structure this deal? Sure, absolutely. Let me take a look at this, let me take a look at this. I can potentially structure it. I also have um realtors that have called me and say, Hey, what's your terms? The terms don't matter because the terms are so different depending upon the type of loan, the structure, and the individual's credit and their DTI. So there's so much that goes into the terms that it is unbelievable. Now, once you have the strategy together for you to work with the um lender and the realtor to write these offers, because see, here's the thing speed plus structure equals the closed deal. So here's the bottom line: most investors are not losing deals because of bad opportunities, they're losing deals because they're not structured correctly. And once you understand how lenders actually work, everything else is changing. Now, if you're serious about getting your deal approved or you're trying to get to the next level when it comes to being a real estate investor or even a realtor one wanting to specialize in working with real estate investors, let's fix that. Schedule a one-on-one strategy call with me. The link is in the description. Also, if you're a real estate investor and you're looking to get approved for a loan, visit my website, which is also in the description at homeloansnetwork.com. I will actually help you structure your deal the right way before you waste time submitting offers that will not close. And if you found this information valuable, please make sure you subscribe, share with another investor, stay locked in because this is the real estate deal room where deals get structured and closings get done. I will see you at the closing table and in the next episode.