| Top 10 Most Frequently Asked Questions about Hard Money in San Diego California |
| Articles - Mortgage |
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1. What is a private money loan?
1. What is a private money loan? A hard money loan, also known as private money, is a loan that is funded by a private individual, entity, or institution. They are typically secured by a strong equity position in the underlying piece of real estate used as collateral. They are usually written with a low loan-to-value (LTV). 2. How does it differ from a conventional/bank loan? Conventional loans also know as bank loans are unwritten or evaluated by placing a significant emphasis on the borrower's income and the borrowers credit history. The most weight, in a hard money or private money loan scenario, is assigned to the value of the equity available in the property being consideration for financing. This is not to say that credit history and income documentation are not considered in a hard money loan application. Nothing could be further from the truth. The issue is simply the overall weight give to different criteria. The trust deed in an instrument used by the borrower to pledge their piece of property as collateral to the lender in case of default of repayment. It is the size of this collateral, pledged by use of the Trust Deed, that forms the biggest distinction between conventional bank loans and private money financing. The private money lender will require that there will be substantially higher collateral than federally underwritten banks. 3. Can you use hard money for loans on commercial and residential property? Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores. The steps taken to make a loan on commercial or residential real estate are similar. The concepts of value and equity between the two are significantly different. 4. My credit is marginal. Is hard/private money financing available to people like me? Usually, without question! However, remember question 2. In any case, a hard money lender will consider 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. Assuming the other aspects of your full hard money loan package are desirable, most private money lenders will still fund. 5. Is there more than one kind of hard money loan? Yes! There are different loans for different borrowers needs. There are hard money loans for cashing out on residential properties, rehab SFR loans, commercial loans, commercial rehab, construction, land and various private money loans for acquisition. 6. If I wanted to get a hard money loan in California what would I need to provide? This question is two fold. The documentation varies depending on whether it is a residential or commercial loan. Residential: Application, Credit Report(broker/lender provides), Appraisal, 2 months bank statements of assets, Proof of Income for one to two years. The hard money lender underwriting a commercial real estate project will typically ask for a financial proforma, a narrative commercial appraisal, two years proof of income, an executive summary, financial statements from the principals (individuals, partnerships, and/or corporations), and a completed application. 7. At what interest rate can I expect to borrow hard money in San Diego? There really is no set answer for this question. The interest rate will differ from deal to deal. To illustrate this, commercial rates are often different from residential rates from the same lender. Interest rates in the range from 10% to 15% are not uncommon. The interest rate a particular private lender charges will depend on the repayment terms of the loan, credit history, whether the loan will be senior or junior, and the condition of the improvements. 8. What kinds of loan repayment schedules are available with hard money? San Diego hard money loans can be made fully amortized, as well as interest only, balloon loans. 9. How long will I have to repay my private financed loan? The length of loan terms for private money loans are normally not as long as conventional loans. Every hard money lender will be different. Typical San Diego hard money loans are made from anywhere from one to five years. 10. Do San Diego hard money investors charge penalties for pre-payment? 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. The last thing you ever want to get is bad or outdated information about San Diego, CA Hard Money. You'll never have to worry about that again after you vistit these sites Scottway Capital Hard Money and San Diego, CA Hard Money. |