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.
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. What is the difference between a hard money loan and a bank loan?
Bank loans, or conventional loans, place most importance on a potential borrowers income and 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.
In California (this may very state to state), the instrument by which a borrower pledges their property as collateral is called the Trust Deed.
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. Are commercial properties and residential properties both eligible for hard money loans?
Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores.
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. My credit is marginal. Is hard/private money financing available to people like me?
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.
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?
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. What will I need to give to my California hard money lender if I want to apply for private money loan?
There are two sides to this question. This is due to the different documentation required by residential loans and commercial loans.
Residential: Application, Credit Report(broker/lender provides), Appraisal, 2 months bank statements of assets, Proof of Income for one to two years.
Commercial: Application, Executive Summary, Pro Forma, Appraisal, Principals Financials, 2 Years Proof of Income.
7. At what interest rate can I expect to borrow hard money in San Diego?
Interest rates on San Diego hard money will vary according to the type of the transaction, the terms of the transaction, and the type of real estate financed.
The interest rate will also vary depending on the following; lien position, term, credit worthiness of the borrower and property condition. Generally speaking the interest rate could range anywhere from 9-16%.
8. Are all hard money loans balloon loans?
Typically interest-only and amortized loans are available for you.
9. How long will the term of a hard money loan be?
The loan term will typically depend on the investor or funding entity. Generally speaking, the loan terms for private and hard money are short in duration. Anywhere from 1-5 years.
10. Are prepayment penalties common in private money loans?
This is an issue that is up for negotiation. It will not hurt to ask for terms that do not include a prepayment penalty. Each lender will consider this request in light of the overall strength of your loan package. - 29904
A hard money loan, also known as private money, is a loan that is funded by a private individual, entity, or institution.
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. What is the difference between a hard money loan and a bank loan?
Bank loans, or conventional loans, place most importance on a potential borrowers income and 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.
In California (this may very state to state), the instrument by which a borrower pledges their property as collateral is called the Trust Deed.
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. Are commercial properties and residential properties both eligible for hard money loans?
Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores.
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. My credit is marginal. Is hard/private money financing available to people like me?
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.
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?
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. What will I need to give to my California hard money lender if I want to apply for private money loan?
There are two sides to this question. This is due to the different documentation required by residential loans and commercial loans.
Residential: Application, Credit Report(broker/lender provides), Appraisal, 2 months bank statements of assets, Proof of Income for one to two years.
Commercial: Application, Executive Summary, Pro Forma, Appraisal, Principals Financials, 2 Years Proof of Income.
7. At what interest rate can I expect to borrow hard money in San Diego?
Interest rates on San Diego hard money will vary according to the type of the transaction, the terms of the transaction, and the type of real estate financed.
The interest rate will also vary depending on the following; lien position, term, credit worthiness of the borrower and property condition. Generally speaking the interest rate could range anywhere from 9-16%.
8. Are all hard money loans balloon loans?
Typically interest-only and amortized loans are available for you.
9. How long will the term of a hard money loan be?
The loan term will typically depend on the investor or funding entity. Generally speaking, the loan terms for private and hard money are short in duration. Anywhere from 1-5 years.
10. Are prepayment penalties common in private money loans?
This is an issue that is up for negotiation. It will not hurt to ask for terms that do not include a prepayment penalty. Each lender will consider this request in light of the overall strength of your loan package. - 29904
About the Author:
Everything they never told you about San Diego Hard Money revealed! For more insider tips and information be sure and check out San Diego Hard Money Company and San Diego Hard Money.
No comments:
Post a Comment