Things to keep in mind while applying to Hard Money Loans
If you have a fantastic deal or need funding in two weeks or faster, but you cannot go to a local bank because of your bad credit. Then hard money loans are just for you. All you need to do is pay more money for the loan bottom line than your local banker, but will be easier and quicker to close your deal. Below are some of the important things that one should keep in mind when applying for a hard money loan:
Title insurance is a must.
All delinquent taxes, judgments, etc. and other liens on the property will typically be taken out of the proceeds unless specifically excluded.
Insurance, typically, will add the lender as co-insured.
Fund control is always set up on construction, development and any loans which have budgets.
Borrower will pay all closing costs, fees, etc. out of proceeds.
Many lenders require the property be put into a single asset LLC, which the loan is made to.
Borrower should be prepared to assign rents.
Interest, in most cases, at least partly will be reserved or prepaid.
Some HMLs require an upfront application fee, due diligence fee and commitment fee. Make sure you understand these fees and how they will be used and if they are refundable.
Almost all lenders require borrowers to have money in the deal. Additional collateral may be required by cross collateralize other properties to keep the loan to value acceptable.
