- Why choose a hard money loan?
A hard money loan may be the best option when working with an institutional lender is not feasible. A borrower may have poor credit, a prior bankruptcy or a foreclosure. Perhaps their income cannot be proven or the desired loan is for a very short time period. They may need a quick closing on a good investment opportunity. There are many reasons why private money makes sense and can be a very good option.
- How long does the loan process take?
Even though we require much less cumbersome documentation for the lending process than the institutional lenders, we do have to comply with laws and standard due diligence. Most of our loans close in less than two weeks.
- Do you have to access my credit report?
We are required by law to access a credit report on every borrower that we provide a mortgage loan for. Credit is not a major consideration in our lending decisions, but overall outstanding debt and the ability to repay the loan is. Credit problems will not prevent us from lending you money if there is sufficient equity in the property.
- Can I get a loan even if I am in bankruptcy?
Under the law we are prevented from lending money to borrowers who are in bankruptcy. Once the bankruptcy is dismissed by the Court, then we can make you a mortgage loan providing there is sufficient equity in the property.
- Are there any upfront fees or costs?
At the time of closing all origination costs and fees are billed. These costs and fees can be incorporated into the loan. The only upfront fee that a borrower might be required to pay would be for an appraisal on the property. Sometimes there are enough market comparables that an appraisal would not be required.
- What is the difference between a private money lender compared to a bank?
Private money lenders can look at the merits of a loan with less regulatory scrutiny since they are licensed differently than traditional banks. There are certain non-negotiable criteria that banks must meet in order to approve a loan.
- Can I pay off the loan anytime prior to maturity?
Yes, our loans can be paid in part or in full anytime prior to maturity. Sometimes if a loan is very short term, there might be a three to six month prepayment penalty.
- How much money will a private lender loan on a piece of real estate?
Decisions for hard money loans are based on loan-to-value (LTV) or the amount of equity in the property. This means that the loan is compared to the value/cost of the property. Private Financial, Inc. tries to maintain a prudent 65% loan-to-value in our underwriting decisions. The amount of equity in the property and the ability to repay the loan are our main considerations in underwriting decisions.