Archive for March, 2010
Do’s and Don’ts of Private Hard Money Lenders
When you search the internet, you’ll find a lot of resources about private hard money lenders. You may need to click dozens of links in order to answer the questions in your head. This article will provide a capsulized information that can help you deal with private hard money lenders.
Usually, private lenders need the following lending criteria:
a. An estimated 65% to 75% of the property’s value
b. No income or credit checks
c. Money is released immediately
d. Higher interest rates
Don’ts
1. Call the private lenders to borrow more money if you already exceeded the 75% value of your property.
2. Pay upfront fees because fees are normally paid at closing.
3. Relay false statements about your current situation because they are just observing your credibility.
Do’s
1. Look around for the most honest lender with lowest fee.
2. Request for the fee breakdown. The typical fees include: loan origination fee, notary fee, and evaluation fee.
3. Inquire about the lending terms and conditions.
4. Check the lender’s prepayment penalties.
Online Mortgage Calculator
Commercial mortgage loan calculators are very useful because they can help in determining the amount that you can borrow as well as your monthly payments.
When you searched over the internet, you can find a lot of real estate mortgage loan calculators. However, before you start the calculations, check if you are using the right type of mortgage calculator. Residential real estate loan calculators can present guidelines on the expected amount but they are not 100% accurate. Banks and money lenders have varying interest rates for different types of real estate.
To use the online mortgage calculator, enter that amount of loan, interest rate and length of payment. Choose your preferred payment option: fixed rate, adjusted rate or balloon rate. All these factors will compute the possible fee that you would pay.
Hard Money Loan Requirements
Hard money commercial mortgage loans are not meticulous with the borrower’s credit score. Instead, they approved loans based on the equity. Unlike the conventional loans, you can close hard money loans faster because they require lesser documentation. You can immediately receive the funds from hard money lenders if you meet their requirements.
1. Cash: Although some lenders do not require down payments, they will charge you with other fees. Funds used in hard and soft costs such as actual site work and engineering plans will be charged on the equity. Normally, private mortgage lenders aim to get 10% cash or hard equity from the borrowers.
2. Equity: Hard money lenders implement lower loan-to-value rations of the substantial equity. Usually, approved loans are not more than 50% of the raw land, 60% of the full entitled land or 65% of infrastructure properties. They do not exceed in 90% of the collateral’s value.
3. Credibility: Although they do not focus on credit reports, private lenders will check your credit history to determine your character and credibility.
4. Experience: Property owners and builders will have better chances of getting a loan compared to first time investors and developers.
With These Factors in Place, You Will be Approved
These are the main things private lenders are concerned with when they consider a hard money loan. If a borrower is of good character, has some experience (or has a partner with experience), and can show both hard (cash) and soft equity in a deal, chances are very good that they’ll easily qualify for a privately funded commercial mortgage loan.