The news could be better. The Joint Center for Housing Studies (JCHS) of Harvard University stated last Wednesday, Dec. 9, that rents in the Los Angeles areas are becoming fearfully unaffordable for tenants. According to the report, almost 60 percent of renters consumed too much of their income for a roof over their heads. About 58.5 percent of the renters from Los Angeles/Orange County (LA/OC) metro areas are “burdened” which means that they are using more than 30 percent of their income for rent and losing out on other necessities such as food and healthcare. As much as 32.8 percent of renters are said to be “severely burdened” consuming over 50 percent of their income for rent’s payment. Los Angeles, in effect, has become the 22nd least affordable metro in the country.
It is not as though the country has not been building. Los Angeles has experienced a building boom for the last 30 years but its multifamily homes and luxurious apartments are built for, and go to, foreign billionaires and professionals earning substantial salaries. The ordinary man of the street cannot afford them.
At the same time, the Los Angeles Times reported that housing demand has risen since too many renters have been evicted due to their failing to pay their rent.
Incomes were adjusted due to inflation and have decreased for about 9 percent since 2001. In contrast, rents have increased for about 7 percent. And now, about 50 percent of U.S. renters consumed almost one-third of their income for rents, attaining a record of 21.3 million, a large increase compared to 2001’s 14.8 million where only 41 percent of renters consumed that much.
Activists are calling for government intervention. But, naturally, that takes time – if the government agrees…
In one corner of the market, hard money lenders are working to redress the situation.
Hard money lenders in Los Angeles
Hard money loan lenders offer you loans based on the value of your collateral rather than on your credit rating. That sounds wonderful since it means that your application may more readily be accepted than were you to apply for loans from the traditional lending situations. This is particularly so in Los Angeles where banks are reluctant to loan even to people who show reasonable trustworthiness.
Hard money lenders are popular because the process is simple. You simply need to complete a few forms that prove your ability to repay and you’ll need to demonstrate the potential that exists in your collateral. The collateral may be the property that you are intending to buy – and in this case you may wish to consider buying a home rather than renting. After all, in LA both options are expensive… Alternately, the collateral may be some other asset.
Borrowers also like hard money lenders because these lenders are fast. The loan turnover can take as short as a week. Some say that they will supply you the funds within 2-3 days! This is certainly faster than the 60-plus turnover of the bank – which may then refuse you.
Then there is the face-to-face rapport; you won’t find this in your local bank. Get the right lender and he may be a pleasure to deal with. Lenders are supposed to be transparent, qualified, certified by both LA agency and by the National Mortgage Licensing System (NMLS) (others may hold licenses from the Department of Corporations or the Department of Real Estate; all are equally valid). As borrower, you will also be protected by a recent slew of Consumer Bureau laws. This is particularly so since you are seeking a loan for a residential rather than commercial property.
Until now the catch with hard money lenders largely revolved on two factors:
- They were – and are – expensive. Hard money lenders request double as much interest as the regular bank does. Few so-called ‘ordinary’ folk can afford that. And if you default on your repayments, the lender pockets your property. Many, therefore, find it better not to take the risk in the first place. Others may want to consider combining a hard money loan with other loans and minimizing the former to the shortest amount possible. Review the lender’s. Each offers a varying range of prices and loan diversities.
- Loan-to-value (LTV) rates have risen. LTV signifies the amount of money that you can expect the lender to give you in exchange for your property. Each lender assesses your property according to his, or her, own decision-making. So for instance, if your property is worth $8000, one lender may give you $1000 whilst another may give you more or less. Hard money lenders are notorious for plunking down loans that amount to gruesome low percentages – somewhere in the 60%-50% range.
A few days ago, Alternative Lending Magazine.com,the largest source for hard money loans and hard money lender programs in California, announced that hard money lenders in Los Angeles have expanded their LTVs to more attractive rates. The Magazine compiled its research from accurate, real-time, internet-based data that had been collected from more than 263 direct lenders. It had also examined housing funding sales trends and lender behaviors such as recorded deeds and final closing statements. The website concluded that, given the situation in California in general and in Los Angeles in particular, these proceedings point to an optimistic future for hard money lenders in Los Angeles.
A cursory look at the latest reports from online LA lending agencies show that one or two individuals or organizations even offer LTVs at 100% of the appraised value.
In short, if you find yourself to be one of the masses in Los Angeles who is looking for lodgings but cannot afford the going price, there is hope… Los Angeles hard money lenders look at the value of your property rather than your credit score or history and may advance you a loan based on that.