| San Diego Hard Money Top 10 FAQ's |
| Articles - Mortgage |
|
1. Just what is a San Diego hard money loan?
1. Just what is a San Diego hard money loan? Private money loans, also referred to as hard money loans, represent a family of loans where the capital comes from a private source. Such sources can include any sort of private entity, like individuals, private corporations, and partnerships. The security for these loans is a considerable equity position in the real estate being financed. This means the L.T.V., or loan-to-value ratio is lower than a conventional loan. 2. How does it differ from a conventional/bank loan? Bank loans, or conventional loans, place most importance on a potential borrowers income and credit history. Although both aspects of the loan application are considered when doing a San Diego hard money loan, more emphasis is placed on the underlying piece of real estate that is pledged as collateral. The equity in a piece of real estate is put forth as collateral using a document known as a Trust Deed. This is the most common instrument in San Diego, as well as most of California. Other instruments are available and they may vary depending on what part of the country you live in. The primary difference between bank loans and hard money or private loans is that the lender requires a larger equity position as collateral in San Diego hard money loans. 3. Can you use hard money for loans on commercial and residential property? You better believe it. It is common to attain private money financing for a variety of commercial and residential property types. In fact properties that do not qualify for conventional financing due to being non-conforming are often successful in qualifying for hard money loans. Commercial real estate is a very different animal from residential real estate. How the overall value and the resulting equity is determined in a commercial property is different than how they are determined in a residential property. However, the steps in processing a hard money loan are very similar for both classes of real estate. 4. I have a bad credit history. Will I be able to qualify for a hard money loan in California? In the majority of cases where borrowers have credit histories that are less than stellar, this fact alone will not prohibit the availability of private financing. Having said this, almost all private lenders will look at the reports of your credit history. Here are the two reasons why even a private money lender will look at your credit score. Firstly, they want to know your monthly debt load. Another reason a San Diego hard money lender will consider your credit history is to determine risk. This is similar to the purpose of a credit report review by a conventional lender. However, the private lender will give less overall weight to this consideration. Usually, your qualification for a loan will hold if the collateral and income portions of your package are within guidelines. 5. Does the phrase, hard money loan, describe more than one financing scenario? Commercial loans for purchase and renovation, scheduled new construction loans, single family loans for refinancing and rehabilitation, and raw land acquisition loans are just a small sampling of the scenarios where San Diego hard money can be used. 6. If I need a hard money loan in San Diego, CA, what information will the lender ask for? This question is two fold. The documentation varies depending on whether it is a residential or commercial loan. A hard money lender underwriting residential real estate will usually ask for 1-2 years tax records, the last two month bank statements, a current appraisal, a completed application, and a three bureau credit report. Documentation for a commercial property includes an application, an executive summary, a pro forma, an appraisal, each principals financial statements, and at least two years of income statements. 7. At what interest rate can I expect to borrow hard money in San Diego? The interest rate will vary depending on the transaction. For example, the type of property will affect the interest rate, commercial vs. residential. Normally, interest rates can be as little as 9% all the way up to 16%. Factors that can impact private money interest rates include term length, the borrowers credit risk, lien position of the lender, and the condition of the property. 8. What type of loan can I request? In general, fully amortized loans and interest only balloon loans are the most common hard money loans. 9. How long will I have to repay my private financed loan? Loan terms from 1 to 5 years are not uncommon. Since the interest rates of hard money loans are higher than conventional loans, the length of the loans is typically shorter than conventional loans. 10. Are prepayment penalties common in private money loans? Each investor is different and each investor's terms will vary from transaction to transaction. When applying for any loan it is a good idea to inquire about eliminating a pre-payment penalty from your loan terms. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Understanding all there is to know about San Diego Hard Money Resources Financing is not always easy. Luckily you can get everything you need right here at Scottway Capital San Diego Hard Money and San Diego Hard Money Resources Financing. |