San Diego Hard Money Top 10 FAQ's
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1. Just what is a San Diego hard money loan?
Hard money loans, a.k.a. private money, are a type of loan funded by a private entity. This could be an individual, partnership 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. Conventional loans vs. hard money loans, what is the distinction?
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. Are hard money loans available on commercial and residential real estate?
Yes! You can use hard money or private loans for residential homes or commercial property.
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.
There are basically two reasons for this. First, they need to determine how much debt you are managing on a monthly basis.
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?
Absolutely! Since the needs of borrowers vary, there are types of loans to fit each borrowers situation. Residential rehab loans, loans for cashing out single family residences, rehab commercial loans, commercial loans, vacant land loans, construction loans, and acquisition loans are all common types of San Diego hard money loans.
6. What will I need to give to my California hard money lender if I want to apply for private money loan?
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.
Commercial: Application, Executive Summary, Pro Forma, Appraisal, Principals Financials, 2 Years Proof of Income.
7. What is the interest rate on hard money?
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.
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 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?
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. Will I have a prepayment penalty?
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.
Article Source: Articlelogy.com
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