San Diego hard money, also known as private money, can be a perfect source for bridge loans. A bridge loan is a general term used to describe a short term loan. Typically bridge loans are less than 12 months but could extend 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 instances where a borrower may need a loan for a short period of time, they may seek private money sources to obtain a loan.
The following are some cases in which a person may use hard money for a bridge loan:
1. To close a purchase fast
2. To prevent a property from falling into foreclosure
3. Refinance a loan that is coming due or approaching a balloon period
4. Take advantage of an opportunity with a quick turnaround
5. Need to draw on equity through a cash-out loan before selling a property
6. Need a short term business loan and you have equity in your property
To be eligible for a hard money loan, you'll need to show the following:
1. Equity
2. Loan to Value (LTV) of less than 65 percent
3. Capacity to Repay
Oftentimes, a given property that is already pledged as collateral may not yield enough equity. In these cases, a private investor may be willing to "cross-collateralize" several different properties to make up the difference.
While these kinds of loans can be processed rather quickly and are typically written for 12 months or less, the lender must be sure to fully underwrite the property, the borrower, and the borrower's credit.
Typically, you'll need to provide the following documents to make a loan request.
1. 1003/Application (Lender must provide)
2. Credit Report (Obtained by lender)
3. 2-6 Months of Recent Bank Statements (Borrower must obtain)
4. Documentation of Income (Borrower must provide)
5. Contract for Purchase (If applicable)
6. Appraisal of Property (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.
The bottom line is that these loans close quickly and provide a good interim solution until a borrower is able to obtain permanent financing. As with most loans, there are few to no fees upfront for getting a California hard money loan. Fees are generally paid in full through escrow upon the closing of the transaction.
If the loan was obtained for a property refinance, fees can often be rolled into the loan. But, if the loan is for a new purchase, the borrower must be able to bring money to escrow before the loan closes.
Example
Refinance scenario: Desired loan amount of $100k, property value of $200k, fees of $10k = final loan amount of $110k with 55 percent Loan to Value (LTV)
Purchase example: $200k property value and purchase price, with a $60k down payment, $10k in fees, final loan amount of $140k, and borrower to pay escrow $70k
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.
For the most up to date information about California Hard Money, these are the only resources you will ever need Scottway Capital Hard Money and California Hard Money.
Thursday, May 28, 2009
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Ten Common Questions about San Diego Hard Money
by Morgan A. Scott
1. 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. What is the difference between a hard money loan and a 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.
A borrowers income and credit history are still important considerations in creating a hard money loan. However, the most weight is given to the collateral, which is the equity in the underlying real estate.
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.
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?
Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores.
The procedures of doing the loan are similar but the concepts regarding the value and equity vary significantly between commercial and residential property.
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.
A hard money lender will want to look at your credit reports firstly because they want to calculate the amount of money you are currently spending servicing debt.
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.
Most often if the other parts of your profile are strong you may still be eligible for a loan.
5. Does the phrase, hard money loan, describe more than one financing scenario?
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. What will I need to give to my San Diego 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.
Documentation for a residence includes an application, at least two years of income statements, a credit report, an appraisal report, and current bank records.
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 kinds of loan repayment schedules are available with hard money?
In general, fully amortized loans and interest only balloon loans are the most common hard money loans.
9. What type of loan term will I have?
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. Will I have a prepayment penalty?
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.
If you've enjoyed all the exciting information you read here about San Diego Private Money,you'll love everything else you find at San Diego Private Money Lender and San Diego Hard Money
1. 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. What is the difference between a hard money loan and a 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.
A borrowers income and credit history are still important considerations in creating a hard money loan. However, the most weight is given to the collateral, which is the equity in the underlying real estate.
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.
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?
Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores.
The procedures of doing the loan are similar but the concepts regarding the value and equity vary significantly between commercial and residential property.
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.
A hard money lender will want to look at your credit reports firstly because they want to calculate the amount of money you are currently spending servicing debt.
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.
Most often if the other parts of your profile are strong you may still be eligible for a loan.
5. Does the phrase, hard money loan, describe more than one financing scenario?
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. What will I need to give to my San Diego 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.
Documentation for a residence includes an application, at least two years of income statements, a credit report, an appraisal report, and current bank records.
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 kinds of loan repayment schedules are available with hard money?
In general, fully amortized loans and interest only balloon loans are the most common hard money loans.
9. What type of loan term will I have?
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. Will I have a prepayment penalty?
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.
If you've enjoyed all the exciting information you read here about San Diego Private Money,you'll love everything else you find at San Diego Private Money Lender and San Diego Hard Money
What You Need to Know About San Diego Hard Money Lenders
by Morgan A. Scott
When one discusses San Diego real estate loans the term 'San Diego hard money' often comes up. But what is hard money exactly? Well, hard money is also known as private money and it is used when describing any loan that is made by either a private person or an entity. When it comes to real estate transactions in the California area both terms are frequently used.
The main difference between the usual types of loans and hard money is that the latter is usually based entirely upon the collateral of the property concerned. Because of this reason, you will discover that very often the loans are written way beneath what the property's value actually is. From the investor's point of view, they wish to make sure that there is sufficient equity available should there be a loss, or if the borrower defaults on their payments.
Whereas usually private investors provide the San Diego hard money loans, they can also be provided by private institutions and entities.
It is always worthwhile to determine whether private money is the right option for your needs. Determining this requires you to consider a number of different variables. First of all, before you decide to make use of private money, you should always consider conventional sources of money. Conventional sources would include national and regional banks and credit unions. When it comes to the best competitive pricing and terms for the borrower, these sources are the best solution.
If a normal bank will not finance your transaction then you may be eligible for private money options. In order to take advantage of these loans there must be equity in the transaction considered, an ability to repay and the willingness to pay 2 to 3 times the amount in interest rate and fees.
This may well cause you to question the logic of utilizing private money. But there are times and occasions when using this type of loan makes sense. Reasons for using private money would include:
You require a Bridge loan.
If you require cash in order to buy property.
You have to renovate a property to sell.
You are in a short escrow and need to purchase quickly.
For financial reasons you find that you need to access the equity in your property.
You need to extend a bridge loan.
You have many properties and a bank will not finance any more.
You have approached the banks but they have refused you finance because you have a unique property.
You are in a strong equity position and you are able to repay the loan but due to a negative credit record the banks have turned you down.
You require a temporary cash flow for your business.
When it comes to San Diego private money, as with most things in life, there are both advantages and disadvantages. Private money is usually expensive and in most cases it has shorter terms than the majority of bank loans. But, because of the speed and flexibility of these loans they are very convenient and valuable. For many borrowers with California real estate needs it can be a very practical tool that they can make use of.
Really, San Diego hard money is really not that hard. In fact the time in which it takes to complete a private money transaction is typically much faster than a traditional bank loan. The difficult part about hard money loans is the fee and terms associated. It definitely is not the best solution for everyone, but it can be a perfect solution for some.
Never before has San Diego Hard Money been this quick and easy! Grab all the inside information while there's still time at Scottway Capital Hard Money and at San Diego Hard Money
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