Hard Money FAQ

Frequently Asked Questions

What is a "hard money" loan?

A hard money loan is often a fast cash offer for real estate purchases. It is a loan made by private lenders when the bank will take too long, or you can't get approved any other way. A hard money loan is also called an equity loan, an asset-based loan, and a private money loan. The bottom line is that the collateral is usually a piece of real estate.

Why hard money?

The most common use of hard money is for a first mortgage offer to purchase non-owner occupied real estate that is in foreclosure or bank owned. It can also be used to refinance, short-refi, or to rehab a property and get it back on the market for a potential profit.

How much equity can I get?

We lend up to 60% of the property's value. Our 60% maximum does not mean we lend 60% in every situation, or on all property types.

How do I prove income?

• If you are a wage earner, we use a paycheck stub showing year-to-date income.
• If you are self-employed, we accept financial statements, bank statements, tax returns, etc.
• If you are on fixed income, such as social security or disability, we require the yearly award letter.

How do you determine value?

We do not use the purchase price. We base the loan on local area comps. We do prefer to use the most conservative value possible in this time of rapidly declining values. Sufficient equity is necessary to make the transaction work.

Do you pull my credit?

First, we take a look at the real estate. See what equity you have. Your is not the determining factor. We will, however, once we are in a position to make an offer, ask permission to pull your credit. We will never pull your credit without proper authorization.

What are the up front fees for a hard money loan?

We do not require up front feest. Our fees are taken out of the loan proceeds at close of escrow. If there are no comps, you may need to pay COD for an appraisal. A residential appraisal is approximately $350.

What if I want to order my own appraisal?

We will handle the appraisal process. We begin with a drive-by appraisal and a look at the neighborhood comps.If there are no comps, we we will need to order a professional appraisal by an independent licensed appraiser. We look closely at the present value and at market trends. Our quotes are conservative.

Is hard money expensive?

Yes, hard money loans are more expensive than bank loans. Interest rates and fees are higher because the risk is greater. If you qualify for a loan from any of the traditional sources, banks like Wachovia, Countrywide, Wells Fargo, or SDFCU, we suggest you proceed with the traditional source money. If you don't qualify for a loan, or if you need fast cash, hard money may be the way to go.

What other fees do you charge?

We charge a loan origination fee in the form of points (a percentage of the loan amount). There is also a loan set up fee, disbursement fee, funding fee, and an opinion of value fee. These fees add $900 to the points quoted as an origination fee.

Are there prepay penalties?

Any prepayment penalty terms will be disclosed in the Note and the Mortgage Loan Disclosure statement. Prepayment penalties are negotiable with the lender. In some situations, a penalty can be waived by accepting a higher interest rate or paying extra points.

Do you report to the credit agencies?

No. We 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 us with the borrower's authorization.

How soon can I have my money?

A typical hard money loan takes 7 - 10 days from start to finish. You will receive a pre-approval within 24 hours of review of the collateral. If you are in an emergency situation, the timeline can be moved up. If you need cash fast for whatever reason, a notice of default, sale of property, home auction, or impending foreclosure, we can put a rush on title and underwriting. We have funded loans in as little as 3 days.

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