There is a strong demand for housing in California. That is the good news. The poor news is that few can afford it. The market has rocketed away from control leaving investors to ponder other solutions. Many are turning to hard money lenders.
The demand for housing in California.
The California Association of Realtors says that essentially all of California is rocking insane by now. The demand for houses has stretched to bizarre levels. That is the good news because it implies that if you are an agent working in that area you have plenty of potential clients who want your services.
And the bad? Few people can buy most of the houses that are currently on the Californian market. They are unaffordable.
The joke in the real estate industry is that if you want to buy a house in California – sure, you can buy a box. Comparatively recently, the LA real estate news traveled the nation comparing property results for $100,000 dollars. In suburban Detroit, you could buy a castle for that amount; in Ft. Lauderville, an orange villa; in Chicago, a stunning condominium near the Lake; and in Manhattan, 200 ft. of earth. California was no better with maybe a small plot that you could rent from an honest landlord with plumbing and utilities included.
Of all areas in California, San Francisco is the nation’s most expensive place to buy with a median sale price of $1,312,500, according to the California Association of Realtors (CAR). The rest of ‘this golden city’ is not much better. In Los Angeles, the median home price is $486,310. But home buyers who want to live in L.A.’s most desirable areas will pay much more, and inventory is tight.
And then you’ll need a loan…
Government-backed conforming loans are capped at $625,500 in high-priced areas. So unless investors can make a substantial down payment to qualify for a Fannie Mae, Freddie Mac, or FHA loan, the only way many Californians can finance their mortgage will be to consider other alternatives.
One of these would be visiting hard money lenders
Hard money lenders – what are they?
More than half of hard money loans is originated and closed in California, and the numbers of hard money lenders who live and bid from this pricey city is growing all the time.
Hard money lenders are independent lenders who dole out their own money to people who need a loan. The money is contingent on the value of the collateral rather than the borrower’s credit history or FICO score. Other advantages are that the process is simple and smooth, the environment personal, the lending schedule and terms flexible; and the process as fast as two days. (Some borrowers actually receive same day turnover). Minuses include low loan-to-value ratio (as little as 50% to 60%) which means that your property may actually be valued at far less than it is. And you have to repay at high interest rates. If you fail to repay, you risk losing your property. For these reasons, many consider applying for hard loans only if they absolutely need them and are unable to get the loan through traditional means. They then apply if they need the loan for short-term purposes and are confident that they can repay.
Prepare for hours of browsing. Hard money lenders in California are a group unto their own. In fact, many directories on hard lenders add an extra page for lenders in California. You’ll find as many as 200 or more if you take the time to research and you use various engines. Lenders find California to be an exciting market – no wonder with its high prices and spiking demand! The advantage for you is that you’ll find reasonably competitive prices. Be prepared to negotiate about schedules, time, and fees. And always research credibility. Lenders in California should be licensed through a Californian regulatory agency and through the National Mortgage Licensing System (NMLS).
Aside from that, draw up a business plan that will outline how you want to use the money and decide what loan you want. Lenders service different clients and provide diverse loans.
The short of it is this…
The costs of housing in California are notoriously high driving professionals to consider buying instead and to look for loans to facilitate the process. The biggest challenge for these borrowers isn’t income, but having enough money for the exorbitant down payment. (This can sometimes as much as 20%). Alternatives such as an interim hard loan could come in useful; many borrowers tend to hook a bank loan later on to check off repayments. You’ll want a wise and trustworthy broker who can help you make one of the most important choices of your life.
Hard money lenders in California could be your answer.