Top 10 Most Frequently Asked Questions about San Diego Hard Money

by Morgan A. Scott

1. Just what is a San Diego hard money loan?

Private money loans, also referred to as hard money loans, represent a family of loans where the capital comes from a private source. Such sources can include any sort of private entity, like individuals, private corporations, and partnerships.

The security for these loans is a considerable equity position in the real estate being financed. This means the L.T.V., or loan-to-value ratio is lower than a conventional loan.

2. How does it differ from a conventional/bank loan?

Conventional loans also know as bank loans are unwritten or evaluated by placing a significant emphasis on the borrower’s income and the borrowers credit history.

A borrowers income and credit history are still important considerations in creating a hard money loan. However, the most weight is given to the collateral, which is the equity in the underlying real estate.

The trust deed in an instrument used by the borrower to pledge their piece of property as collateral to the lender in case of default of repayment.

The biggest distinction between conventional loans and hard money loans is the equity position required as collateral by the lender. In hard/private money loans equity position of the borrower may be as high as 15-40%.

3. Are hard money loans available on commercial and residential real estate?

Absolutely! Hard money can be used for any type real estate: single family homes, land, apartments, industrial buildings, office buildings, and retail stores.

Commercial real estate is a very different animal from residential real estate. How the overall value and the resulting equity is determined in a commercial property is different than how they are determined in a residential property. However, the steps in processing a hard money loan are very similar for both classes of real estate.

4. My credit is marginal. Is hard/private money financing available to people like me?

Most often, yes! As mentioned earlier, private money lenders still need to look at your credit report regardless of the project.

A hard money lender will want to look at your credit reports firstly because they want to calculate the amount of money you are currently spending servicing debt.

Second, they need to determine how you have managed your credit in the past and what type of risk they need to associate with this.

Assuming the other aspects of your full hard money loan package are desirable, most private money lenders will still fund.

5. Is there more than one kind of hard money loan?

Commercial loans for purchase and renovation, scheduled new construction loans, single family loans for refinancing and rehabilitation, and raw land acquisition loans are just a small sampling of the scenarios where San Diego hard money can be used.

6. What will I need to give to my California hard money lender if I want to apply for private money loan?

There are two sides to this question. This is due to the different documentation required by residential loans and commercial loans.

Documentation for a residence includes an application, at least two years of income statements, a credit report, an appraisal report, and current bank records.

The hard money lender underwriting a commercial real estate project will typically ask for a financial proforma, a narrative commercial appraisal, two years proof of income, an executive summary, financial statements from the principals (individuals, partnerships, and/or corporations), and a completed application.

7. How much does San Diego hard money cost?

There really is no set answer for this question. The interest rate will differ from deal to deal. To illustrate this, commercial rates are often different from residential rates from the same lender.

Normally, interest rates can be as little as 9% all the way up to 16%. Factors that can impact private money interest rates include term length, the borrowers credit risk, lien position of the lender, and the condition of the property.

8. Are all hard money loans balloon loans?

Typically interest-only and amortized loans are available for you.

9. How long will the term of a hard money loan be?

The loan term will typically depend on the investor or funding entity. Generally speaking, the loan terms for private and hard money are short in duration. Anywhere from 1-5 years.

10. Will I have a prepayment penalty?

This is an issue that is up for negotiation. It will not hurt to ask for terms that do not include a prepayment penalty. Each lender will consider this request in light of the overall strength of your loan package.

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What You Need to Know About San Diego Hard Money Loans

by Morgan A. Scott

San Diego Hard Money

When one discusses real estate lending, the term ‘San Diego hard money’ often comes up. But what is hard money exactly? Well, hard money is also known as private money and it is used when describing any loan that is made by either a private person or an entity. When it comes to real estate transactions in the California area both terms are frequently used.

San Diego private money differs from conventional loans in that private money, or hard money, is based solely on the property’s collateral. That is why it is commonly found that these loans are written way beneath the actual value of the property concerned. Basically, the investor wants to ascertain that the available equity would be enough to cover any loss or default by the borrower.

Often times hard money loans are from private investors. However, they can also be from private institutions and entities.

If you are undecided about whether San Diego hard money is the solution for you then you will find the following information relevant. When deciding on this as your possible course of action you will need to consider a number of points. You should make sure that you have tried the usual sources first. These would include loans from either national or regional banks, as well as credit unions. In most instances these avenues will provide the borrower with the most competitive pricing and terms.

Sometimes, for various reasons, banks choose not to finance your transaction, in which case you could then look into whether you qualify for private money loans or not. Before you will be considered you will need to show that there is sufficient equity in the transaction, as well as your ability to repay the loan at two or three times the amount in interest and other fees.

This could well result in you wondering why anyone would opt for this course of action. However, it is important to bear in mind that often these are the types of loans that make the most sense. Some of those instances are listed below:

• When you require a Bridge loan.
• You wish to purchase property and require an investor.
• You need to rehabilitate an existing property for the purpose of selling.
• You find that you are in short escrow and you need to buy without delay.
• For financial reasons you find that you need to access the equity in your property.
• You have a bridge loan that needs an extension.
• You have approached the banks but they have refused you financing because you own many properties.
• The bank will not loan you more because you have a unique property.
• Although you have strong equity and you are able to repay the bank refuses to finance you due to a troubled credit record.
• You require a temporary cash flow for your business.

When it comes to private money, as with most things in life, there are both advantages and disadvantages. Private money is usually expensive and in most cases it has shorter terms than the majority of bank loans. But, because of the speed and flexibility of these loans they are very convenient and valuable. For many borrowers with California real estate needs it can be a very practical tool that they can make use of.

Hard money is not hard at all! Unlike a bank loan which can take a while to process, hard money loans usually do not take that long. But, because of the attached fees and the terms and conditions some people feel that it is not a worthwhile option to consider. Although not everyone will find it the right solution for their needs, San Diego hard money is often the right way to go for many others.

Getting San Diego Private Money has never been this easy! Get more free information by going to these websites San Diego County Hard Money Lender and San Diego Private Money.