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HARD MONEY BUILDER LOANS
Builder and Developers can get hard money loans. Land acquisition and construction loan. 25% down payment and up to 100% construction. No credit scores, no debt to income ratio, no income. No DSCR, NO RED TAPE. FAST CLOSINGS. For one to four units residential non-occupant projects.
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7 Replies
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We need more hard money lenders!
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We have hard money loans up to 70% LTV in most states. It is 75% in Utah, Nevada, and Idaho. Right now, the most popular hard money loan program is hard money loans for spec homes, fix and flip, and short term investment property loans. For example, spec home or fix and flip one to four unit builder loans is the hard money lender will financing up to 75% of the purchase price of the land and 100% of the construction as long as the after improved loan to value appraises at 75% LTV once finished. No credit score required, no debt-to–income ratio requirements, and no income docs required. As long as you have a recent history of having two properties on title and a history of being a spec builder or real estate developer, you can close fast and there is no stress.
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We have the capacity to handle billions of dollars as hard money lenders. What we need is to let the public know how our Hard Money Loan Programs are different from the competition
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Eric, have the trades on the condo development you are doing check out our equipment financing. 100% LTV, 700 FICO, no income docs or credit score. One day closing and funding.
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okay I will do that. Some guys are buying expensive cranes for example
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Tractors, cranes, and business equipment are all expensive. Food trucks, dental equipment, maintenance equipment, farm equipment, x-ray machines, bobcats, tractors, trailers, backhole, vans, office furnishings, and other business equipment financing.
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That seems like a great chance for builders and developers! Hard money loans are an effective way of acquiring funds without the usual procedures. Here are some of the things that come into the picture:
Hard Money Loans: Pros For Builders And Developers
Fast processing of documents: Time is essential to keep projects on course, and hard money loans do that by allowing for fast loan processing, which will probably close in a couple of days to weeks.
High-loan-to-Value ratios: Some loans even extend to construction loans that cover all project construction expenses. That potentially eliminates sacrificing any other funds when a down payment is needed.
Low resources needed: Hard money loans don’t require sufficient income, existing credit score, or pre-existing-owned debt to be used.
Fewer bottlenecks: The application involves few to no stacks of paperwork, and processing and repaying the loan becomes quicker this way.
Considerations
Increased interest rate: Due to easy approval, hard money loans are on the higher risk side and, therefore, charge a higher interest than traditional loans.
Shorter duration: These loans range from 12 to 18 months and may require a fingerprint if funds are to be retained long-term.
Collateral: For a hard money loan, the collateral is still the same asset—the property, which means there must be a clear game plan for selling or refinancing the property.
We will discuss in detail the requirements for a hard money loan and the various steps in the mortgage process.
Requirements to get Hard Money Loan
Property Collateral: In most cases, the financed property is the security of the loan transaction.
Most lenders will issue loans based on the property’s fair market value and would be interested in financing no more than 60% to 85% of this value.
Down Payment: To qualify for hard money, the borrower must make a down payment of 10 – 30 % of the property.
Cash Reserves: Some lenders may also ask for cash reserves equal to three months’ worth of loan payments.
After Repair Value (ARV): Most lenders base their property valuation on the After Repair Value and seek a 70 % or lower ARV.
Credit Score: Many hard money lenders don’t check borrowers’ credit rigorously; however, some will have a cutoff credit score of around 660.
Mortgage Process for Hard Money Loan
Pre-Qualification: The first step is to discuss your project and financial situation with the lender to ensure you’re the right candidate for a hard money loan.
Loan Application: This includes information pertaining to the project, the subject property, and the borrower’s financial status with respect to the project; hence, completion of a formal Loan application form is necessary.
Property Appraisal: The lender will appraise the property to establish its value at the time of the transaction.
Underwriting: The lender will consider your application, the property appraised, and any other documents presented to determine the level of risk undertaken.
Approval: If the received documents are in order, the lender will approve the loan, and you will receive a loan commitment letter that describes all the terms and conditions.
Closing: This involves executing loan documents, releasing funds, and recording the mortgage with the appropriate agencies.
Additional Considerations
Interest Rates: The short approval time and the high interest rate make hard money loans more expensive.
Shorter Terms: These loans may be for shorter periods, not longer than one and a half years, as the minimum remains twelve months, and refinancing is required when the project duration is over.
Repayment: There are several repayment modes, such as the balloon repayment structure, which comprises an interest-only repayment during the term and a sitting rate at the end of the period.
This sounds like a great chance for the builders and developers. Securing financing is, in most cases, a frustrating process filled with tedious processes. But for hard money loans, it is straightforward. Given that, here are some pointers that you should be aware of:
What Builders and Developers Can Expect to Gain From Hard Money Loans
The Last One to Close: Most hard money lenders facilitate their clients by providing a longer repayment duration since completion of the loan can take just a few days or, in some cases, even weeks, which can help the developer or builder to complete their projects in due time.
Frequent Comments Checking: Most builders believe these loans can provide auto construction on core projects where they feel the loan-to-value (LTV) ratios are high, meaning they need extra funds for their down payment.
No Lawyers Involved: There will be little disagreement on terms and procedures so that funds will be available quickly. This narrowed application of documentation requirements should allow for quick disbursement of the loan funds.
It Is Necessary To Bear In Mind
High Lending Rates: Generally, the risk for a lender in hard money loans is greater. This means there will be tougher financial penalties, such as higher interest rates.
Repayment Duration: A common trait of hard loans is their short repayment duration, 12 to 18 months at the standard length. Once the project’s completion rate has reduced, builders may have to refinance it.
Collateral: In most cases, the borrower must repay the loan. However, they may use the property as collateral to secure the loan. Therefore, selling or refinancing the property (if necessary) first requires crafting a good strategy.
Here is a precise overview of all the steps necessary to avail of a hard money loan and the mortgage procedure:
Requirements to avail of Hard Money Loans
Property as Collateral: In most cases, the property you are trying to finance will act as your collateral.
The procedure for setting the loan amount is based on the property’s market value. For instance, most loans appear to cover between 60 and 85 percent of the worth of the given property, among other things.
Down Payment: There are hard money lenders who instead look for 10 percent or more, usually paid upfront in exchange for a loan to buy a property offering a maximum rate of 30 percent.
Cash Reserves: The lender may also ask for 3 months of loan equivalent cash reserves.
After-Repair Value (ARV): The lender may also consider and demand that 70% of the loaned worth be lower than the property’s After-Repair Value (ARV).
Credit Score: Some hard money lenders don’t scrutinize borrowers thoroughly, making it easier to take loans. However, some require the borrower to have at least a 660 credit score.
Mortgage Plan for Hard Money Loans
Pre-Qualification: During this first stage, the lender determines a candidate’s risk of exposure, assesses their funding, and decides whether they should opt for a hard money loan.
Loan Application: Prior to anything else, you will be required to fill out a formal loan application detailing the property in question, the specifics of your project, such as timelines and budgets, and your financial standing.
Property Appraisal: The next step is to value the property, and the lender will organize an independent third party to carry out the appraisal.
Underwriting: The lender considers the application, the appraisal of the property, and any other pertinent facts about the transaction in question.
Approval: After you fulfill all of the conditions outlined in the appraisal, you will receive the final approval for the loan, followed by a loan commitment letter detailing everything the lender will do for you.
Closing: The last step involves signing loan papers, dispersing the funds, and registering the mortgage with the authorities where the property was registered.
Additional Points
Interest Rate: Hard money loans are secured with higher interest rates since they are deemed higher in risk and have less time for available options.
Shorter Terms: The tenor of such loans is typically short. These can vary between 12 to 18 months and will likely be refinanced after the project.
Repayment: Payments can be made in several forms, such as interest-only payments payable at maturity or at the end of the specified period.
That seems like a great opportunity for builders and developers! Hard money loans can be a great way to acquire funding quickly without the standard hoops. Here are some points worth considering in regards to hard money loans:
Hard Money Loans Advantages for Builders and Developers
Fast Closes: Hard money loans are said to have fast closes, which happen within a few days, perhaps weeks, which is great for ensuring that certain project timelines are stuck to.
Max LTV: There are loans that require no down payment and provide umbrella coverage of as high as 100% for construction projects.
Financing on the easy side: Many hard loans do not require a credit check or income and DTI requirements like a normal loan.
Less hassle: There are fewer requirements and thus fewer wait times, allowing you to receive the money you need as fast as possible.
Points to ponder
Expensive: Due to the lack of backing and the no-waiting period, hard money loans usually have an expensive price tag compared to normal loans.
Payable in the future: These loans are short-term, ranging from 12 to 18 months. They will be fully paid once the project finishes or is refinanced.
Collateral: The property usually serves as collateral for the loan, meaning you must have a good strategy for selling or refinancing it.
This write-up explains how to qualify for a hard money loan and mortgage in more detail.
Guidelines for Qualifying for Hard Money Loans
Property as a Security: The property you buy is what you are borrowing for and can be used as security.
Normally, the loan target is the property’s current value, so the financing range is always between sixty and eighty-five percent of that value.
Down Payment: Most hard money lenders require a deposit or down payment of ten to thirty percent of the property’s worth.
Cash Retention: Other lenders may need their cash retention equivalent to three months of the loan repayment.
After-Property Value (ARV): Most lenders use the property value post-repair as the guide (ARV), so they may ask for an ARV value of less than seventy percent.
Credit Score: Many hard money lenders do not check their borrowers’ credit histories—however, some set credit scores at around 660.
The loan application and the documentation the lender requires may be confusing, but here is how I found the process easier.
Pre-Qualification: This is the first step, which involves outlining the project and financial requirements with the lender and determining the level of risk that a hard money loan poses to an investor.
Loan Application: A formal loan application form is required from you. That information includes the property, the project, and your financial status.
Property Appraisal: The lender will appraise the property to establish its current value.
Underwriting: The lender will examine your application, the property appraisal, and other appropriate documents to determine the risk level.
Approval: If all the above are true, the lender will issue the loan, and you will receive a commitment letter detailing the conditions under which you are getting the loan.
Closing: Finally, the loan documents will be signed, the funds disbursed, and the mortgage registered with the relevant authorities.
Additional Considerations
Interest Rates: Hard money loans have higher interest rates because of the risk involved and because they are quick to process.
Shorter Terms: These loans are often short-term, in most instances 12 to 18 months, and may need to be refinanced after the project is completed.
Repayment: Some payment options include an interest-only payment with an adjustable balloon structure at the end of the term.