Talk to a borrower today who wants to purchase a property or to refinance an existing one, and they will tell you nightmare stories about loans taking 60-90 days to close, lenders asking for more and more documentation even after docs are signed, and generally jumping through hoop after hoop after hoop. With STILL No guarantee a loan will close! And for Self-employed borrowers? Please. IF a S/E individual can get qualified via bank statements or other means (doubtful) it still is going to be an uphill battle to get the deal done.
In the meantime, perhaps a seller gets too impatient, an opportunity slips away, another buyer gets the property, a foreclosure is not forestalled, or in any other way a deal is lost. What is the cost of the lost opportunity? And what about the brokers who spend Hours and hours on the file, only to see it bite the dust - and all that time being wasted?
For investors wanting to increase their holdings, or to leverage their equity for another business purpose, the value of a non-prime or sub-prime or even hard money loan, cannot be overstated. Time = Money in business. So doesn't it make sense that paying a little higher rate for a loan that can get you a deal or cash quickly, has value? Of course it does! As time increases to get a loan, opportunities Decrease. It is an direct inverse relationship.
Lots and lots of investors AND mortgage brokers are finding this to be the case, and are happy to be able to have a source that funds quickly and allows an investor to leverage existing property in order to buy more. For those like the S/E borrower who do not show enough income on a tax return, or who choose not to, subprime or hard money can be a blessing.
We are not quite back to the loans of 2006-2008 when subprime meant liars and 500 FICOs on a stated income basis, but the demand is there for alternatives to the bank loans and to Fannie and Freddie -type loans. The market is responding, and private and portfolio lenders are filling the gap. Expect to see more and more "Non Prime" and "subprime" loans in the next few years as the demand grows and more investing activity takes place with the resurgence of the real estate markets.