Monthly Archives: October 2013

Document Preparation Tips for Hard Money Loans

To streamline the preparation and reduce delays, phone calls and other follow-up steps, up-front preparation is essential. The information required to prepare loan documents will need to be adjusted based on the loan type (purchase, refinance, development, construction, etc.). However, I recommend that a checklist of items, similar to the following, be used to ensure that the necessary information is gathered:

• Borrower’s name (whether individual, corporate or other) including vesting, title of signor, address, phone, fax, income, asset liabilities, schedule of assets, completed 1003 or similar application
• Borrower’s personal guarantee—yes or no
• Borrower’s down payment or cash-in (if applicable)
• Seller’s carry amount (if applicable)
• Address, APN and legal description of the subject property
• Other collateral: cross collateralized property address, APN and legal description
• · Payment frequency: monthly, quarterly, etc.
• · Due date of payments
• · Approximate payment due date
• · Amount of payments
• · Broker’s name, license number, address, phone
• · Trustee’s name and address (if applicable)
• · Schedule of use of funds

What is Hard Money? Who needs it.

Hard money lenders are typically private individuals or small groups that lend money (Hard money) based on the property you are buying, and not on your credit score. Usually these loans cost  more than an average mortgage, often times up to twice what a regular mortgage does, plus origination fees.

Who Needs Hard Money

Developers and house flippers, amongst others, will use it to fund deals because you can often borrow up to 100% of your purchase price! On the other hand, hard money lenders will frequently require you to back up your loan with real assets. If you know you can buy a property and turn it quickly at huge profit, and you can’t get a standard mortgage, it might be one way to go. Some investors use hard money to get into the property, do some quick fixes to raise the property value, then get a new loan (based on the property’s new, improved value) from a bank to pay off the hard money lender.

5 Ways To Find Hard Money In Your Area.

Ask a Real Estate Agent

Real estate agents are probably the best source for tracking down hard money lenders. While not every agent will personally have contacts with hard money lenders, the agents that move a lot of bank REO’s probably do. Keep asking agents until you find one that can get you connected with a hard money lender.

Ask a House Flipper

A great source of finding good hard money lenders is simply other investors doing the same thing. You can find other flippers by tracking down who is buying many of the “fixers” in your area via a real estate agent or country records.

Newspaper

Some newspapers include a section titled, “Money to lend.” Often times a hard money lender will use this area to advertise for their business. Remember – a hard money lender needs you as much as you need them.

Craigslist

Over the past several years, many hard money lenders were forced to take back a number of properties in foreclosure. I personally know several hard money lenders who are using Craigslist to sell these foreclosed properties. Look for “For Sale By Owners,” and “handyman specials.” You may need to sift through a large number of duds but don’t get discouraged – it only takes one to fund a deal.

Mortgage Brokers

Mortgage brokers are individuals who get paid to find you a loan. They don’t simply work for one institution but rather have the ability to search multiple sources to find the best fit for you. Most mortgage brokers do not have contacts with hard money, but some do. Note: this may be a more expensive route to take, as often times the mortgage broker’s fees will be added to your costs.