What is Hard Money?
Hard Money is a private lending alternative for Real Estate investors. Private investors/Lenders will lend their money and will use the property as the collateral.
Usually these loans cost (percentage-wise) much more then an average mortgage, often times up to twice what a regular mortgage does, plus high origination fees.
Hard Money Lenders normally don’t make decisions based on credit, but they do based on equity and income.
Why Hard Money is beneficial to Trust deed investors?
Hard Money Lenders best source for years was Trust deed investors from all over the world. The reality is that most investors don’t have that many options out there as far as getting high ROI(Return On Investment).
Most investors have a job or a company where they make their money and from there to the bank. In some cases investors are trying to “PLAY” in the stock market and most of them loose their money in days because they don’t have enough knowledge to make the money they want to make. In Real Estate it’s different because your money is protected with the most secure and profitable investment “Real Estate”.
In Trust Deed investing your name/company name will be on the actual deed as the lender. With and ROI of 10% to 12% and Interest only payments. This Rate will be Fixed and payments will deliver to you on a monthly basis.
Who needs Hard Money?
Developers, Flippers and long term investors are the blood of the Hard money business. These type of investors main concern is getting the deal and making money from it. Most Real estate investors don’t really show much income on their tax returns but they do make enough money to make the payments, so they can not qualify for a loan with a conventional lender. Hard Money will provide them the money they need to purchase/refinance their real estate within days without looking at their tax returns or credit.
Interest Rates, Terms, Loan amounts, Points & Fees:
Hard money lenders normally generating their income from points they charge during the escrow process. Income can be generated also from the interest rate being charged on the mortgage, so the hard money lender will charge 11% on the loan and the trust deed investor will get 10%- In this scenario the hard money lender makes 1% spread. Rates are normally between 8%- 12%, points start at 2.5 from the loan amount.
Borrowers Credit score & Income:
Hard Money lenders really don’t look at credit, but income can be crucial. Hard money lenders accept borrowers that had foreclosures, bankruptcy, mortgage lates, collections, etc. Income will be verified through borrowers bank statements. Since we know that most self employed professionals never really report in the tax returns most of their real income. Hard money lenders need to verify that Borrowers can make the payments before they can get any money.
Type of properties & Borrowers we will consider:
Hard Money lenders normally lend money on income producing properties, commercial and residential only. Very few lenders out there will lend their money on Land.
Hard Money lenders want to make sure that in the case that they will have to foreclose on the property it will be easy to re-sell and recoup their invested money.
Type of Borrowers we will consider are Real estate investor on NON Owner Occupied properties only. The reason we don’t lend money to owner occupied properties is “Section 32″(you will find information about section 32 below).
Locations where we lend Hard money:
We lend money in California and Nevada only. These states are close to one another and it’s easier for us to travel to look at the properties. We do inspect all properties before lending any money!
What is “Section 32 Law”?
Learn more about section 32- High Rates High fees CLICK HERE
Initial connection with us:
Borrowers know about HML Investments through California Mortgage/Real Estate brokers, Bankers, Social Networks, Search Engines, Financial Magazines and word of mouth/Referrals.
Application & Risk Assessment:
Once borrowers create the initial contact with us, we will ask for them to fill up a full 1003/Loan application and provide us with some documentation such as: Bank statements(To confirm their income), Credit report, Property Appraisal(Appraisal is being done only with an appraiser HML will contact), Assets(if any).
Once we get all the documents we will start the underwriting process and risk analysis. In the underwriting process our job is to determine if borrower can make the payments and pay us back by the end of the term. This process may take us couple of hours if all docs are in.
Escrow & Title Opening:
Once we finished the risk analysis we will open escrow and Title(In some cases we will open escrow before underwriting, depends on the file and if it needs a little longer research). Title company will get us the Prelim so we can see if there are any liens, judgments or anything else that will put the lenders money at risk. If we do detect any liens or judgments we will see if possible to pay them off through escrow or if now. We are experts in detecting errors on title and fix them in some cases. Escrow have to be open so all documents and money being handled is secure before closing the deal.
We don’t do any Hard Money Loans without Title & Escrow Opened!
Protection coverage confirmation:
While doing everything we can to protect our investors money, we will also require some more protection: Hazard insurance, C-ALTA title insurance, Fire insurance.
Learn more about C-ALTA Title insurance, Fire insurance, Hazard Insurance- Click Here!
Funding & Recording:
Once the file is ready to FUND, we will contact our investor to deposit the money in escrow. Before our investors money goes into escrow, our underwriter already made full confirmation that all docs are in, approved and ready for funding.
Once the Loan FUNDED, we will wait for recording by the Title company(Happens normally the day after FUNDING). Recording the DEED is crucial, this will give a notice that you are in 1st position and from now on who ever record after you any other lien, you are always stay in the 1st position because you recorded first.
Hard Money process can take up to 2 weeks, but normally will take 5 to 7 days.