I specialize in CA hard money loans. In talking with potential clients every day, there is a misperception about hard money these days. In this post I am going to look at hard money loan guidelines for today, and give a quick overview on why things have changed.
It was not long ago that hard money loans were quick, easy and aggressive. 80% financing with hard money was not uncommon. No documentation was the rule rather than the exception, and appraisals were taken at face value. Then the market crashed and things changed.
Many investors lost a lot of money when the market crashed. There were areas of the state where values were down 50% or more. For someone who had lent 80% of the value of a property, they now had no security for their loan as the equity had been eroded. This is essentially what brought about the change in hard money lending terms.
Fast forward to today and you will find some major differences between the lending of 5 years ago and the lending of today. For one thing, the loan to value ratios have declined. Finding a hard money loan for 80% loan to value is not realistic. Most hard money loans are being done somewhere between 50-65% of the value of a property.
In addition, more paperwork is being required. Credit is becoming a factor. While you do not need excellent credit for a hard money loan, having poor credit could mean a reduced loan to value. Income documentation is also becoming a common request. Again, not giving documentation for your income may not disqualify you for a hard money loan, it could reduce the loan to value an investor is willing to offer.
The types of properties that hard money lenders are willing to make a loan on has also changed. Land deals and ground up construction deals are much more difficult to get done than they were in the past. Again, they are not impossible to get done, but the loan to value ratios and ‘skin in the game’ that is required are different today than five years ago.
If you have not looked at CA hard money loans for a few years and find yourself in the situation where you do need that type of financing, be prepared for some changes to your expectations. For more information, or to discuss a scenario, please give me a call directly at 877 462 3422. If you prefer, you can visit our hard money loans page online for more information and details on hard money lending in today’s market.
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