The easy answer, of course, is to work with First Western Federal Savings Bank, but if you’re looking for something a little more convincing than that, here are the traits you should look for in a good lending partner.

Your Mortgage Broker Recommends Them

You already trust your mortgage broker, so one of the easiest ways to find a reliable non-recourse lender is to simply ask them for suggestions. It’s very likely that your broker works with lenders like these and can help you connect with them. Indeed, your broker may even have insights into the non-recourse lending process, which you can then take advantage of once you begin investing.

They Speak From Experience

Having a good reputation is one thing, but reputation alone will not help you secure the right loan for your needs. Looking at a lender’s experience is a crucial part of the borrowing process. Ask the lender how long they’ve worked in the field, past projects, and how they stay up-to-date on the latest changes in laws and rates. The more experienced the lender, the better your experience will be. 

They Lend Reasonable Amounts

When it comes to taking out an IRA non-recourse loan, or any loan really, you’ll want to make sure that the lender can offer you everything you need. You don’t want to have to take out several loans in order to make just one investment. 

Additionally, you want to make sure that the lender isn’t offering exorbitant amounts of money in their loans. If a lender offers too much, you might encounter a situation in which they have insufficient funds to accommodate your loan. Here at First Western Federal Savings Bank, we offer loans in amounts ranging from $40,000 to $800,000. 

The Lender is Responsive

In an era where we can connect in more ways than ever before, working with an unresponsive lender is unacceptable. The lender should always be timely in their responses, and thorough in the resources they provide you during the lending process. Taking a loan of any kind can be a confusing and intimidating process, and a good lender will take the time to walk you through it all. 

In a similar vein, the lender should make decisions on a loan quickly. Once you’re approved, the processing time should be prompt, and the lender should notify you of changes as they occur. We’re committed to offering our clients a streamlined experience, so we make loan decisions within two days, and our processing time takes about 35 days from the application date.

They Offer a Variety of Loans and Services

A reputable lender offers several different loans and services. While you might only be interested in one, like a non-recourse IRA loan, checking for other options is a good idea. Lenders who offer different loans are best suited to help you should your needs or situation changes. This flexibility means that you can work with them on a variety of projects and they can support you every step of the way.

Partner With a Trusted IRA Non-Recourse Lender Today

Finally, a good lender will act as your strategic partner. More than just offering you financial backing, they’ll provide you with market insights, lending suggestions, and provide you with the knowledge and resources you need to make the best investments possible. Throughout the course of your loan and your repayment period, your lender will offer you the assistance you need. After all, when you find success after taking out a loan, the lender does too.

First Western Federal Savings has been helping Americans invest in real estate for more than 40 years. We offer IRA non-recourse loans that can help you attain your financial goals. You can use these funds to invest in properties that you can make into rental or vacation properties. Connect with our lenders today to get started.

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UBIT is not an onerous tax, and most real estate activities inside of a self-directed retirement plan where leverage is used do not actually incur much in the way of UBIT. But it can be a concern for those investors using leverage and the beauty of the Solo 401(k) is that issue is completely taken off the table. So when you are thinking of establishing that self-directed retirement entity that you are going to use to invest in alternative assets and particularly real estate, think about a Solo 401K. If that is an entity that you are allowed to use for your investing strategy for retirement it also has the advantage of the owner of the account also being the Trustee of the funds and therefore has complete control over the investing activities of the entity. That means there is no need to work through a Custodian or Administrator for any transaction the entity does. The Trustee of the Plan simply runs the entity like a separate business entity and as long as all the rules are followed, the Trustee has complete control over the activities inside the plan. That freedom from having to work with a large company to transact business makes the Solo 401K a great fit for independent minded investors who want to control their own financial destiny.

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Let’s start with Recourse Loans first which is the typical loan you may sign at a bank or credit union when you borrow money for a car or a home or commercial building. You usually sign the promissory note in your own name or your companies name and you are responsible for making the payments on that loan. And if there is a default on the loan, you as the borrower can be sued for the unpaid balance of the loan.

On a Non-Recourse Loan, you do not sign the loan as the borrower and have no personal obligation to pay the loan back. These types of loans are used when a Retirement Plan (IRA, 401K, etc.) borrows money for a real estate purchase for example. The IRA custodian itself signs the loan, not the person who’s IRA is actually borrowing the money. Or in the case of a LLC where the Member’s of the LLC are IRA’s, the manager of the LLC signs the loan promissory note, but the person’s involved with the IRAs in the LLC do not sign the note personally. And in any default on the loan, the bank can only sell the collateral if there is any and recoup funds in that manner, but in no way can the lender sue or go after the person who’s IRA actually borrowed the funds.

So Non Recourse Loans have no personal guaranty and no personal obligation to pay back the loan, whereas a Recourse loan allows the lender to take action against the borrower if there is a default on the loan and use whatever means is allowed by law to collect the unpaid debt.

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1. Does the IRA or SoloK or IRA LLC have enough money? What I mean by that is, does the Plan have the requisite 40% down payment necessary for most properties we finance, plus closing costs, and liquid assets still left in the Plan of 15% of the loan amount as reserves.
2. Does the cash flow from the property pay all operating expenses such as taxes, insurance, maintenance, management fees, and loan payments and have excess cash flow each month? We want to see a minimum of 1.25 Debt Service Coverage.
3. Is the property a good property in terms of condition (doesn’t need a lot of work to be rent-ready), neighborhood, priced in line with other homes in the immediate area, conforms to other surrounding properties, etc.?
4. Management of the property will be solid, whether you as the owner of the IRA are experienced in rental property management yourself and can handle the issues involved or will have professional property management if the property is located in another state or you just are most comfortable with professional management.

If a non recourse loan request will have these 4 components covered, then you are well on your way to acquiring that rental property in your SD IRA or Solo K or IRA LLC.

The post Non Recourse Loan Underwriting Criteria appeared first on First Western Federal Savings Bank.

As a non-recourse lender, we require that when your retirement plan is borrowing money for the purchase or refinance of an IRA-held property, you keep at a minimum 15% of any and all loans outstanding in liquid funds inside the retirement plan. That way, should there be some months without a tenant, unexpected repairs, or other unforeseen expenses, the IRA can still make any loan payment, do any repairs, or handle any expense of the IRA or property owned by the IRA without stressing you or your plan’s finances. It’s just good business planning.

So when thinking about that property purchase with your self directed IRA, Solo 401(k) or IRA LLC, plan for the unexpected and keep some reserves leftover. You’ll sleep better at night! Contact First Western Federal Savings Bank with any questions you might have, or to begin the application process.

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