The 3CALoan Private Hard Money Mortgage Loan Lending Advantage
What is a Private Hard Money Loan?
In real estate financing, a private hard money loan is a non-bankable loan on an investment such as a single-family home or a duplex. When a borrower needs a fast loan or if traditional lenders do not approve of a borrower’s loan, the borrower turns to private hard money loans. Underwriters base their decisions on the borrower’s hard assets and use the residential investment real estate property as collateral in this transaction. These hard money lenders secure these asset based loans by the strength of the real estate more than the borrower’s financial credit. These loans are generally short-term, which means they can last from 1-5 years. Due to the nature of the loan, however, it is understandable that the interest rates are higher than traditional loans.
Unlike most other loans, private hard money loans do not require proof that the borrower can repay the lender. Credit scores and income are of little importance for these loans. As long as the homebuyer has a good history of responsible borrowing and the ability to repay loans, they meet the lender’s approval. Furthermore, the approval process under other loans is painfully slow. For other loans, it can be a long process if the borrower has negative credit reports. Even if the borrower has great credit scores with a healthy income under other loans, it can take a long time. Yet, with a private hard money loan, it can take as few as 3-4 days to get the lender’s approval.
The different types of Private Hard Money Loan lenders and the borrowers they are good for:
Non-traditional Loan Funders
As mentioned above, the lender for private hard money loans are non-traditional lenders. In other words, they usually are not an established public lending facility such as an established bank. To elaborate, these lenders may consist of the following degrees:
- Family and friends
- Colleagues, professionals, acquaintances, and personal acquaintances
- Accredited investors
Who are these loans good for?
The aforementioned groups provide funding to the following borrowers:
- Short-term and long-term investors
- Buy-and-hold investors
- Long-term portfolio investors
- Short-term fix-and-flippers
To clarify and elaborate, these loans are usually short-term loans for short-term fix-and-flippers and long-term investors. Typically, the investors who invest in these loans are looking to invest or renovate a property. In addition, the non-institutional lenders also provide rehab financing, which means that unlike conventional mortgage loans, the purchased real estate does not need to be in a good condition to receive such financing. For example, fix-and-flippers own a property just to increase its value. After the value increases, the borrower sells it and repays the loan within a year or so. Long-term investors, on the contrary, would use the loan to get into a property. They would stay there and eventually refinance as they find a better loan.
How Private Hard Money Loans work?
Private hard money loans are short-term loans that are considered to be the most reliable loans. They range from 1-3 years with standardized interest rates, costs, fees, and loan terms. Furthermore, the first and second degree lender groups mentioned above have loan terms, rates, and costs that may vary widely. For example, these non-traditional lenders may also charge the borrower a 7-12% interest rate with a 1.5-10% lender fee.
Additionally, private hard money loans have lower credit qualifications with fast approval funding processes. For instance, a client can have a minimum personal credit score of 550. He can meet the pre-qualification in as little as 3 minutes to receive funding in 10-15 days.
The loan-to value ratio (LTV) for private hard money loans are relatively low. The maximum LTV ratio may be 50-70%. In other words, assets are not a necessity to meet the qualifications of private hard money loans. The ratios being so low give the lenders assurance that the borrower’s property can be sold quickly. Furthermore, the lenders feel secured in that they have a reasonable shot at getting their money back.
Why should you choose 3CALoan?
When it comes to investing in properties, often times the difference between a good investment and a great investment is financing. 3CALoan understands this. For this reason, we have developed a comprehensive mix of highly customized private hard money loan programs offered at competitive rates. The loan programs help maximize our clients’ returns based on the individual needs and requirements her property. Therefore, owners and investors can spend less on interest and fees and turn an even bigger profit from their investment in real estate.
There are flexible loan terms and payment schedules available to fit the needs of any owner or investor. So, it does not matter whether the funding is used on the purchase, the construction, or the renovation of a building. Refinancing loans are available to save current owners money on their mortgage loan payments. No matter what the size of the building, we can offer private hard money loans that fit an owner or investor’s individual needs. The multiple loan programs ensure you get the financing that is best for a borrower and her property. We can provide private hard money financing for all of the following:
- Large, multi-million dollar commercial complexes
- Mid-size commercial complexes
- Smaller commercial, such as strip center, retail building etc.
Our competitive rates, efficient services, and talented team can help ease the process of purchasing a home. We like to make sure our clients are well-informed and educated about what happens every step of their home buying process. Our excellent quality services are reflected on our client’s happiness and confidence upon closing a deal. To find out more information about FHA loans and how we can help, contact us at (818) 322-5626.