This question is often asked more than any other when talking about San Diego Hard Money. To start, hard money is also commonly called private money.
In this article you will learn about a San Diego hard money loan and the different aspects it takes to complete one. Refinance loans, development loans, purchase transactions and processing of the loan will be explained.
When working with private money loans it is important to understand the general guidelines. Because private loans are based on equity lending, it is essential that the loan in question have a low loan to value(LTV) ratio.
The LTV is normally written at 65% or under. This means that the amount loaned when compared to the value must be under 65%. Also, the condition and value of the property is considered. A property that is in a less desirable traffic area may be considered by private lenders and investors as long as the LTV was very low in order to minimize perceived risk.
Also, the person seeking the loan must have the ability and means to repay the loan. The stronger the collateral and the ability of the borrower to make payments will usually make a hard money loan worthwhile.
As with any transaction, the fees,terms and rates will vary.
As a general rule, the rates are usually anywhere from 9 to 15% according to the risk of the loan, the type of property being used for collateral and the lien position. Unlike a bank loan, the terms for this type average from 1 to 3 years. However, the fees are double or even four times the fees charged for a typical loan.
Now that the guidelines as they typically occur have been discussed, here is some information that may help explain the use of hard money loans in various transactions.
1. Purchase Transactions - When structuring these types of loans, the lender will scrutinize the purchase agreement and the appraisal for the property in question. The appraisal will be the basis for value and the purchase agreement will determine the market and subsequently create a foundation for the transaction.
It is important to note that the loan amount and LTV will be based off of the purchase price or appraised value, whichever is LOWER. This is because of the reasoning that the true value is determined by price. In case of a purchase, ultimately, price is whatever the buyer and seller agree upon. Most lenders will assume this concept unless there is an extreme discount that can be shown and proven by the borrower.
The other aspect that differs with purchases is that the borrower must bring in to escrow the down payment and any fees charged. This is different because in refinances the fees are typically financed into the overall loan amount.
2. Refinance Loans - As opposed to a purchase loan, the investor will focus heavily on the appraisal, title which would show any existing liens, and the desired loan amount. These are the primary concerns of an investor funding a refinance loan. Refinance loans differ from purchase transactions because the fees are being financed in to the amount borrowed. Meaning that the fees are combined with the amount being borrowed after the payoff of current loans and any cash out.
3. Development Loans - The construction loan or the development loan has three basic features. The LTV often is contingent upon the future value of the property. The funds are distributed according to a draw plan.
Lastly, money is put aside for the repayment while the construction is being done by setting up an interest reserve account at inception. These are the three ways a development loan differs from other types of hard money loans.
With all of these hard money loans, you will need some standard documentation, and possibly more specific documentation depending on the type of loan that you seek. Some standard documentation would include; appraisal, borrower's application, borrower's credit report, bank statements, income documentation, and a title policy.
More specific documentation might include; purchase agreement, executive summary, construction breakdown, and draw schedule. With most private money loans you are usually looking at 7-14 business days from lender receipt of the entire loan package. These times may vary depending on the complexity of the transaction.
In conclusion, hard money is a great way to fund non-conventional projects in a short period of time. Hopefully, you have a better idea of how San Diego hard money works.
In this article you will learn about a San Diego hard money loan and the different aspects it takes to complete one. Refinance loans, development loans, purchase transactions and processing of the loan will be explained.
When working with private money loans it is important to understand the general guidelines. Because private loans are based on equity lending, it is essential that the loan in question have a low loan to value(LTV) ratio.
The LTV is normally written at 65% or under. This means that the amount loaned when compared to the value must be under 65%. Also, the condition and value of the property is considered. A property that is in a less desirable traffic area may be considered by private lenders and investors as long as the LTV was very low in order to minimize perceived risk.
Also, the person seeking the loan must have the ability and means to repay the loan. The stronger the collateral and the ability of the borrower to make payments will usually make a hard money loan worthwhile.
As with any transaction, the fees,terms and rates will vary.
As a general rule, the rates are usually anywhere from 9 to 15% according to the risk of the loan, the type of property being used for collateral and the lien position. Unlike a bank loan, the terms for this type average from 1 to 3 years. However, the fees are double or even four times the fees charged for a typical loan.
Now that the guidelines as they typically occur have been discussed, here is some information that may help explain the use of hard money loans in various transactions.
1. Purchase Transactions - When structuring these types of loans, the lender will scrutinize the purchase agreement and the appraisal for the property in question. The appraisal will be the basis for value and the purchase agreement will determine the market and subsequently create a foundation for the transaction.
It is important to note that the loan amount and LTV will be based off of the purchase price or appraised value, whichever is LOWER. This is because of the reasoning that the true value is determined by price. In case of a purchase, ultimately, price is whatever the buyer and seller agree upon. Most lenders will assume this concept unless there is an extreme discount that can be shown and proven by the borrower.
The other aspect that differs with purchases is that the borrower must bring in to escrow the down payment and any fees charged. This is different because in refinances the fees are typically financed into the overall loan amount.
2. Refinance Loans - As opposed to a purchase loan, the investor will focus heavily on the appraisal, title which would show any existing liens, and the desired loan amount. These are the primary concerns of an investor funding a refinance loan. Refinance loans differ from purchase transactions because the fees are being financed in to the amount borrowed. Meaning that the fees are combined with the amount being borrowed after the payoff of current loans and any cash out.
3. Development Loans - The construction loan or the development loan has three basic features. The LTV often is contingent upon the future value of the property. The funds are distributed according to a draw plan.
Lastly, money is put aside for the repayment while the construction is being done by setting up an interest reserve account at inception. These are the three ways a development loan differs from other types of hard money loans.
With all of these hard money loans, you will need some standard documentation, and possibly more specific documentation depending on the type of loan that you seek. Some standard documentation would include; appraisal, borrower's application, borrower's credit report, bank statements, income documentation, and a title policy.
More specific documentation might include; purchase agreement, executive summary, construction breakdown, and draw schedule. With most private money loans you are usually looking at 7-14 business days from lender receipt of the entire loan package. These times may vary depending on the complexity of the transaction.
In conclusion, hard money is a great way to fund non-conventional projects in a short period of time. Hopefully, you have a better idea of how San Diego hard money works.
About the Author:
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 What is Hard Money?
No comments:
Post a Comment