Hard Money: The Ideal Source for Bridge Loans
Articles - Mortgage
San Diego hard money is also called private money. This can be a great funding source for bridge loans. A bridge loan is a phrase used to describe short term loans. Bridge loans typically have repayment terms of 12 months or less, but the deadline sometimes runs as far as 24 months.
by MorganA.Scott


San Diego hard money is also called private money. This can be a great funding source for bridge loans. A bridge loan is a phrase used to describe short term loans. Bridge loans typically have repayment terms of 12 months or less, but the deadline sometimes runs as far as 24 months.

They are used in residential and commercial financing.

Often bride loans are used until permanent financing can be secured by the borrower. Because they are short term loans, they usually have points and fees that are greater than conventional bank loans.

In cases when a borrower needs a short-term loan, it's sometimes necessary to find private money sources to get a loan.

Some examples where a person might use hard money for a bridge loan could include the following:

1. You need to close on a purchase quickly

2. To prevent a property from falling into foreclosure

3. Refinance an existing loan that's due or will soon hit a balloon period

4. Take advantage of an opportunity with a quick timeline

5. Need to draw on equity through a cash-out loan before selling a property

6. Get a short term business loan secured by equity in your property

In order to qualify for a hard money loan, you would need to have the following.

1. Equity

2. Loan to Value (LTV) below 65%

3. The ability to repay the loan

In some cases, a property that is already held as collateral may not offer enough equity. In these situations the private investor might be willing to consider other property as collateral by "cross-collateralizing" multiple properties.

Though these loans are processed quite quickly and written for a short term of just 12 months or less, they must be fully underwritten by the lender for the borrower, the borrower's credit, and the property.

Typically, you'll need to provide the following documents to make a loan request.

1. 1003/Application (Lender will provide)

2. Credit Report (Lender will obtain)

3. 2-6 Months Recent Bank Statements (Borrower provides)

4. Income Verification (Borrower must obtain)

5. Purchase and Sale Agreement (If applicable)

6. Property Appraisal (If applicable)

7. Pro Forma (If applicable)

8. Executive Summary (If applicable)

9. Cost Break Down (If applicable)

The usual time frame for getting a hard money loan in place is about 7 to 14 business days after the lender has all of the borrower's information in hand. It should now be apparent that private money loans close far more quickly than conventional loans. Because of this, private loans are a viable solution for those in need of a bridge loan.

Ultimately, these types of loans close faster and are a good option for bridging the gap until permanent financing is in place. As with many loans, there are typically few or no fees that must be paid up front when it comes to a California hard money loan. Loan fees are paid through escrow when the transaction closes in most cases.

If it is a refinance loan, then the fees usually can be financed back into the loan. If it is a purchase loan, then the borrower will have to bring money into escrow before the closing date.

Example

Refinance example: $200k property value, $100k desired loan amount, and $10k in fees will result in a final loan amount of $110k at 55% LTV

Purchase scenario: $200k property value, $200k purchase price, down payment of $60k, $10 in fees = final loan amount of $140k, with $70k in escrow to be paid by borrower

San Diego hard money can be used for various projects. This article shows the benefits of using hard money for bridge loans. Because hard money loans can be organized quicker than bank loans, they are often used in situation where temporary financing is needed.

To ensure that you make the best loan decision, evaluate your situation thoroughly and come up with several possible paths for achieving your goals.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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