What is a "Hard Money" Loan?

A 'hard money' loan, also known as a 'private money' loan, 'equity-based' loan, or 'asset- based' loan is based primarily on real estate collateral. Private lenders fund the loans rather than institutions such as banks.

What is the most common use for private money?

The most common loans are first mortgages on non-owner occupied properties in Southern California used for purchases or cash-out refinances. Another popular funding is the owner occupied mortgage loan only available to the self-employed to use for business purposes exclusively.

Do private money lenders cooperate with real estate brokers and other mortgage brokers?

Yes, you can qualify for referring broker fees, if you are properly licensed in California.

How much equity can clients get?

Private lenders consider lending up to 60% of the property value. This 60% maximum does not mean they lend 60% in every situation, or on all property types. 

Do clients need to pay for anything up front?

Private money lenders do not require any fees up front. Their fees are taken out of the loan proceeds upon close of escrow. Occasionally, the borrower may need to pay an appraisal fee up front when an outside appraisal is needed. That fee would be paid directly to the appraiser, not the lender.

Who orders the appraisal?

Private money lenders generally handle their our own appraisals. Usually, they do an in-house appraisal when the property is typical for the neighborhood and sales comps are available. In today's market, they look very closely at the value and the value trends. 

If this is not the case, they will order an appraisal with an independent licensed appraiser.

It is not recommended that borrowers order their own appraisal. Private lenders, like conventional lenders, give less credibility to appraisals ordered by the borrowers.

Are lending charges higher for hard money loans?

Private lender money loans are more expensive. Their rates and fees are NOT competitive with banks, government, or other conventional lenders. If your client qualifies for a loan from one of these sources, we recommend staying away from private lenders and hard money loans. The only exception is if your client needs money fast and/or short term for a profitable investment project. 

What other fees do lenders charge besides your points?

In addition to their loan origination fee, quoted to you in the form of points (a percentage of the loan amount), they charge a loan set up fee, disbursement fee, funding fee and an opinion of value fee.

Do they report to the credit agencies?

No. They do not report payment history or any loan information to any credit agency. Credit history can be verified by faxing a Verification of Mortgage form to the lender with the borrower's authorization.

What happens if a client can't afford to make their monthly mortgage payments?

Mortgage payments should always be the top priority. If a client is unable to pay all their bills, they should consider making the mortgage payment first. The more equity the property has the more they stand to lose through foreclosure.

Also, late fees, collection costs, and foreclosure fees are chargeable to the mortgage account. These fees can add up quickly, compound financial difficulties, and hurt the ability to catch up after falling behind.

How long is the loan process?

It typically takes 7 to 10 days from start to finish. You will receive your pre-approval on the same day submitted, and approvals within 24 hours. 

Will lenders pull a client's credit report when they apply?

No. Credit is not necessary for lenders to make a loan decision. They don't pull a client's credit until after they know they are making a loan for your client, and not without the client's permission.

How do I get started?

The starting point is a call to us at 1-714-721-1004 or apply online by submitting a loan scenario for a same day preapproval.

             
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