How to Get a Hard Money Loan

With many qualified borrowers still getting turned down by the banks, more and more people are looking into how to get a hard money loan for their real estate transaction.  The steps to getting a hard money loan are not difficult, and today we are going to look at the most common questions a lender has when underwriting a hard money loan request.

There are three basic questions that are going to be asked.  What is the purpose of the loan, what is the collateral for the loan and how do you intend to pay off the loan.  These are the three basic questions you need to be able to answer.  We will look at each one in a bit more detail here.

First off, what is the purpose of the loan?  Where to go to find the money you need often depends on the answer to this question.  Some hard money lenders do not lend for consumer purposes.  Some do not lend for construction.  Knowing the purpose of the loan will allow a lender to quickly tell if the loan is for them or not.  If you are working with a broker, knowing the purpose of the loan is going to allow them to present your transaction to the appropriate lenders.

Secondly, what is the collateral for the loan?  This is important as the collateral is the security for the money the investor is going to lend.  The more upfront information you can provide on the collateral being offered, the better.  Old appraisals are helpful, a broker CMA or price opinion report can help.  If the property is income producing, a P&L or operating statement and rent roll is good.  Pictures are always nice.  This is really the foundation of the loan, and when you are looking for money to borrow you must be able to present a complete picture of the collateral.

Typically speaking a hard money loan is going to be based on the value of the collateral.  Usually hard money will lend up to a maximum of 60-65% of the value of the property, although there are some exceptions.  Land is going to be less aggressive, below 50% loan to value.  Construction completion or rehab lending is going to take into account not only the as is value, but also the as complete value of the property.  Having all of this information upfront and presentable is going to help you find the money you need.

Finally, how do you intend to pay off the loan?  This is very important, as most hard money lenders do not want to take your property.  They want to make interest on the money they lend, get paid off, then make a loan to someone else to keep their money working for them.  Typical exit strategies include selling the property or refinancing the property.  Having a good solid exit strategy is going to greatly assist you when looking for a hard money loan.

Visit us online for more information about our California hard money loans, or give me a call today to discuss your scenario at 877 462 3422.  We can help place hard money loans for most property types, and with a 10 minute conversation we can typically give you a good idea of whether or not we can help with your situation.