Some people are concerned about the intricacies of the hard money lending transaction wondering what is in store for them and how they’re going to manage it. The hard money lending process has gone through major changes over the past few years mainly becoming more rigid regarding regulations. You will find that hard money lenders in Los Angeles will more closely scrutinize your credit and work qualifications and that it will help you to have some real estate experience under your belt (although that is not necessary). With the advent of TRID, the closing procedure may also have changed somewhat. Knowing what to expect can help you prepare your proposal and maybe make you feel more comfortable about the procedures.
The hard money lending system takes faster than that of the bank. It may be as fast as three days but that does not minimize the complexity of the underwriting itself. Some observers have mentioned less hassle and far fewer docs to sign than those in the typical bank scenario. The truth is: the system may be faster and maybe less bureaucratic. There is still a lot to do.
Hard money loans can be used to fund all sorts of loans not necessarily property. They can be used (for instance) to repay debts too. Hard money loans are mostly used as mortgage or fixer-uppers – rehab or bridge loans. This article outlines the situation that you amye experience from any typical hard money lender in Los Angeles as you wrap up the closing stages of your loan.
Parties sitting at the table will be the Borrower (i.e.yourself or the entity that you are representing), the Seller (the person selling you the property), the Hard Money Lender, the Real Estate Agent(s), the Title Company and the Escrow Company or Settlement Services Provider. Each of these parties will be present in the the closing stages.
The borrower consists of either you or the company or startup, or other legal body that you are representing. The real estate website “Private Money Lending Guide” advises that if you’re representing someone else, fill out the resolution required for most hard money loans which grants you authority to act on behalf of the entity.
The seller is the individual or legal entity from which you are purchasing the property.
Hard money lenders are the company or ideals who provide you with the source of private investor funds for the hard money loan. The licensed agent represents the he borrower/buyer and/or seller for purposes of sales term negotiations and contract execution. The title insurance company prepares and provides a preliminary title report on the subject property(is) offered as collateral for the hard money lenders. his report is compiled by searching the county and public records for all information, liens, judgments, easements, etc against the property as well as the borrower and/or seller.
Finally, you have the escrow company or settlement services provider that collects and disburses the funds as directed by the private investor, oversees the final signing of all applicable deeds and loan documents and document recording with the appropriate county office. In Los Angeles, this will be performed by an escrow officer and is a separate department of the title company. (In eastern US states such as New York, it’s known as settlement services and is performed by an attorney).
Preparation to Signing the Documents.
The closure starts way before with the setting out of the various documents.
The title company gathers information about the borrower and seller (if applicable). It runs a search of county records for liens, judgments, easements and any other history and details that involve the borrower, seller and/or property. The title company then creates a preliminary title report that is an offer of title insurance on the property before handing its reins over to the escrow services company.
The escrow division accepts the borrower’s deposits pursuant to purchasing the contracts. It reviews the organizational documents of all entities involved (borrower, seller, hard money lender, private investor when applicable) and determines the authorized signers. It also obtains payoffs of existing liens on property as well as the rent rolls, leases, service contracts, security deposits, property tax information and so forth for proration calculations. The escrow coordinates the 1031 Exchange process (if applicable to borrower or seller). It prepares settlements statements in accordance with the lender/investor instructions and purchase contract and receives the hard loan document package from the lender.
This escrow division, in short, is the entity that coordinates and oversees the actual signing of the documents that make up the “loan closing”. In some parts of LA, the seller may integrate the closure with the hardmoney processing. In other parts, the seller may choose to conduct each closure separately at a different time and place. Hard money lenders in Los Angeles mostly follow different procedures.
After you Sign the Documents
The hard money lender wires the loan proceeds to the escrow services company which, in turn, records the deed, mortgages, and so forth with the county.
Now comes the good part: The escrow services company hands you (and sometimes the seller) the funds. The title company wraps up the closing by issuing the title insurance policy(ies).
Even though this loan process may take as short as 3 days, the entire system is closely regulated to offset the huge risk that the hard money lender is taking. The loan transaction is complete when the security instrument (e.g. mortgage or trust deed) documents are recorded, and the funds are disbursed. All of this is done in a highly regulated organized manner. The closing and loan funding process generally takes faster in LA (and in many parts of California) than it does in most other regions and states.
A good lender will give you a checklist of items you will need so you are not requested to produce documents for the hard money lender at the last minute. He will likely also prepare you for the ending so you’ll be able tow your way through.
In short, hard money lenders in Los Angeles gather a team to provide you with your funds and structure a complex but efficient set of strictures to help you – and them – with the closing. Knowing what happens may likely make an apprehensive situation far more calming for you. Check your way off the items until you make that sale!