A warehouse is a short-term loan that allows mortgage originators to fund the construction or acquisition of properties. Warehousing allows originators to close loans quickly without waiting for permanent financing at https://lendingwarehouse.com/. It also allows them to lock in rates and terms at the time of origination.
Ten Reasons to Use a Warehouse for Lending:
One of the main advantages of using a warehouse is that it allows you to close loans quickly. This is because you do not have to wait for permanent financing to come through before you can close on a property.
- Rate lock:
Another benefit of using a warehouse is that you can lock in rates and terms at the time of origination, even if rates rise before the loan is sold. This protects you from interest rate fluctuations and gives you peace of mind knowing that your loan’s interest rate is locked in.
Warehousing also gives you the flexibility to structure loans in different ways. For example, you can offer adjustable-rate mortgages (ARMs) or interest-only loans without worrying about whether these products will be available when it comes time to sell the loan.
- Lower costs:
Warehousing can also help you save money on Origination, due diligence, and marketing costs associated with selling loans on the secondary market. This is because you only incur these costs once when you originate the loan, rather than incurring them each time you sell a loan on the secondary market.
- Access to capital:
When you warehouse your loans, you have access to capital that you can use to fund more loans. This is because lenders who provide warehouses typically advance up to 90% of the loan amount once approved. This allows you to originate more loans without worrying about finding them yourself.
- No prepayment penalties:
Unlike some other types of loans, warehousing has no prepayment penalties. Therefore, if you find a buyer for your loan before it is sold on the secondary market, you can prepay it without penalty and keep the entire proceeds from the sale.
- Lower risk:
When you warehouse your loans, there is less risk because your lender has agreed to purchase the loan from you after it is funded. If something happens and you cannot sell the loan on the secondary market, your lender will still purchase it from you at an agreed-upon price.
- Better terms:
Compared to other financing types, warehousing typically provides better terms, such as lower fees and higher advance rates. This is because lenders providing warehouses are typically more flexible than other lenders, such as commercial banks.
- Quicker turnaround times:
Warehouses provide funding for loans before they are sold on the secondary market, so they typically have quicker turnaround times than other types of financing.
- Improved customer service:
Because warehouses are typically smaller and more flexible than other lenders, they can provide better customer service.
As you can see, there are many benefits of using a warehouse for your lending needs. If speed, flexibility, and lower costs are necessary, then a warehouse should be at the top of your list when considering financing options.