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Understanding Table Funding: Meaning and Benefits | Table-Funded Loans Explained

August 28, 20234 min read

Are you looking to delve into the world of real estate investment? Perhaps you've come across the term "table funding" and want to learn more about what it entails. In this comprehensive guide, we'll break down the concept of table funding, its significance in the real estate industry, and how it can impact your investment strategies.

Introduction

Real estate investment can be a lucrative endeavor, but understanding the various financing options available is crucial for success. One such option is table funding, which plays a significant role in facilitating real estate transactions.

What is Table Funding?

Table funding is a financing method commonly used in real estate transactions, especially in the mortgage industry. It involves a third-party entity, often a mortgage broker or correspondent lender, partnering with a wholesale lender to provide funds for a borrower's mortgage.

How Does Table Funding Work?

In a table funding scenario, the mortgage broker or correspondent lender processes the loan application and gathers necessary documents from the borrower. Once the application is complete, instead of using their own funds to close the loan, the broker collaborates with a wholesale lender. The wholesale lender supplies the funds for the loan closing, and the transaction takes place at a "closing table," which gives the method its name.

Key Players in Table Funding

  • Mortgage Broker/Correspondent Lender: Acts as an intermediary between the borrower and the wholesale lender, handling the loan origination process.

  • Wholesale Lender: Provides the funds for the mortgage, often working with multiple mortgage brokers or correspondent lenders.

Advantages of Table Funding

  • Efficiency: Table funding can expedite the loan process, as the wholesale lender is equipped to handle underwriting and funding efficiently.

  • Variety of Loan Options: Borrowers can access a wider range of loan products, as the wholesale lender offers various options.

  • Risk Distribution: By partnering with multiple mortgage brokers, wholesale lenders can spread their risk effectively.

Potential Drawbacks to Consider

  • Less Control: Borrowers may have less direct interaction with the wholesale lender, potentially leading to misunderstandings.

  • Limited Transparency: Some borrowers might find it challenging to discern the lender behind the scenes.

  • Broker Fees: Mortgage brokers may charge additional fees for their intermediary services.

Table Funding vs. Other Financing Methods

Table funding stands in contrast to direct funding, where a lender uses its own funds to provide a loan. It also differs from warehouse funding, where a lender uses its own line of credit to fund loans.

Steps to Secure Table Funding

  • Loan Application: The borrower submits a loan application to the mortgage broker.

  • Document Collection: The broker gathers necessary documents, including credit reports and income verification.

  • Underwriting: The wholesale lender assesses the borrower's eligibility and creditworthiness.

  • Loan Approval: Once approved, the loan is prepared for closing.

  • Closing: The loan closes at a designated table, with funds provided by the wholesale lender.

Factors Influencing Table Funding Approval

  • Credit History: A strong credit history increases the likelihood of approval.

  • Income Stability: A steady income stream demonstrates the borrower's ability to repay.

  • Debt-to-Income Ratio: Lenders assess whether the borrower's income can support the loan.

The Role of Credit Scores

Credit scores play a crucial role in table funding approval. Higher credit scores can lead to better loan terms and lower interest rates.

Table Funding's Impact on Real Estate Investments

Table funding can streamline the investment process for real estate investors, providing quick access to financing for property acquisitions.

Regulatory and Compliance Aspects

Both mortgage brokers and wholesale lenders must adhere to industry regulations to ensure transparency and fairness in lending practices.

Table Funding: Myths vs. Facts

  • Myth: Table funding is illegal.

  • Fact: Table funding is a legitimate financing method widely used in the mortgage industry.

Tips for Successful Table Funding Applications

  • Gather Documentation: Prepare all necessary documents to expedite the application process.

  • Communicate: Maintain open communication with both the broker and the wholesale lender.

  • Research: Understand the terms and conditions of the loan before committing.

Conclusion

In the realm of real estate financing, table funding offers a streamlined and efficient way to secure mortgage loans. By partnering with wholesale lenders, mortgage brokers provide borrowers with access to a diverse range of loan options. As you embark on your real estate investment journey, consider the benefits and potential drawbacks of table funding. Remember, informed decisions lead to successful investments.

FAQs

1. Is table funding a common practice? 

Yes, table funding is a prevalent method in the mortgage industry.

2. How does table funding differ from direct funding? 

Table funding involves a partnership between a mortgage broker and a wholesale lender, whereas direct funding uses the lender's own funds.

3. Can table funding benefit real estate flippers? 

Absolutely, as it provides quick access to funds for purchasing properties to renovate and resell.

4. What role does the borrower play in table funding?

The borrower applies for the loan through a mortgage broker and provides necessary documentation.


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