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Last Minute Hard Money Loan Denial

What Happens If You Get A Last Minute Hard Money Loan Denial?

We’ve all had it happen; a deal is made, you have it under contract and you’ve gotten a commitment from a private lender to get a deal done. It’s time to get to closing and all of a sudden your private lender gets cold feet. This situation can happen on a moment’s notice and for a number of reasons. From the funding not being available for some reason, to them just not feeling good about doing the loan; they just don’t feel like doing it anymore. Frustrating to say the least.

Risks Associated With Last Minute Hard Money Loan Denial

There have been times too where the Private Lender wasn’t exactly honest with you and strung you along until it was too late. This of course means that you lose your earnest money and worse, your projected profit. Nothing could be worse than knowing you got burned in either of these circumstances. However, there are ways to safeguard your “deal” from falling out due to a lender mishap.

How To Avoid Last Minute Hard Money Loan Denial

Let’s go through how you can do the most to ensure your deal is funded on time.

  1. Know thy lender – this may sound strange, but it makes sense to know who you’re dealing with. Whether they are a broker or a direct private lender or even an institutional lender, you will want to know who it is that either pulls the trigger or can help you figure out whether or not a loan is going through. Sometimes when you don’t know them well, they may not communicate so well because they are working with the ones they do know well and have good track record with. In that case you’ll have to be a squeaky wheel until you can prove your worth. Make sure you know what they’ve lent on and what their criteria are from the outset. Don’t try to be the interviewer, get to know them, they will tell you what they’re looking for. You find a deal like what they said they’re looking for, you know exactly who to take it to and what to expect when it becomes time to get the deal done.
  2. Format and organize your opportunities – Although there are a ton of templates out there, that doesn’t mean your lender will understand it. You may need to send them a couple of samples and or a prospectus for new lenders. This allows them to get to know you and show them how organized you and your team are. This should bring them a better level of confidence in lending to you. If they have questions or have their own format to fill out, don’t buck em; just do it. Remember you’re trying to get them to end to you, not the other way around.
  3. Communicate often – Sometimes to the point that it almost seems annoying. Don’t stop after the loan is closed and funded either, check in with them after the fact when the next payment is due. Even though you can check on third party sites, it’s good to check in with them so you’re at the top of their minds as well. They may have more funds that come back to make new loans with. Sometimes it’s a simple phone call, sometimes it’s a hand written note. Whatever makes them feel appreciated, do it.
  4. Day of closing – Make sure you follow up with your lender to let them know everything went well, or that there were some challenges and what is being done to resolve it. It gives them a sense that they are still in control and thought of well by their broker or borrower.

Last but not least, even if they do try to back out, you can go through the opportunity again. Sometimes, something didn’t click and they need to hear it one more time, or perhaps stated in a different way. Communicate and don’t get frustrated if they still back out. It happens.

NOTE: It’s always good to have a second lender on standby in case your primary can’t do the loan for whatever reason. Cover your bases, and you will find a way to get it done.

Michael Kaleikini: Hard Money Capital Group

If you are a hard money loan borrower and need a hard money loan or private money loan, contact Michael Kaleikini.  Michael Kaleikini is the President and Chief Operating Officer of Hard Money Capital Group and represents solid hard money investors and private money investors whom he had dealt for many years and does not change their minds once they conditionally approval a hard money loan.  Michael Kaleikini can be reached at mikanui@gmail.com.

 

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Cost Of Hard Money Loans

Blog Fix Rehab Flip Loans Hard Money Loans with Bad Credit Investing in Private Money Loans Investors Purchase

The True Costs Of Hard Money Loans

The Costs Of Hard Money Loans

Fees And Costs Of Hard Money Loans

I had an interesting conversation recently with a prospective borrower on the cost of getting a hard money loan. It went something like this: “ So, what are the terms and costs of you guys have for a hard money loan?”

I explained the standard terms were for 12 months interest only usually unless the amount got to be really large then we tried for 24 months max. The fees out of pocket are $300 for an interior inspection so that our investor has an independent unbiased opinion of value on the subject property, and then we can talk about the origination and processing. That’s the only fees we have. No other what are called “rubbish fees”.  “and how much are those fees?”

Cost Of Hard Money Loans: Upfront Points And Fees

I explained that the origination is a minimum of $4000 or 3%-4% points depending on the loan amount and the processing is $495. Interest rates are between 12-16%.

Then comes the pushback. “Wait, how much is this going to cost me?”

I re-explained the terms and fees. Then silence.

“Wow, that’s pretty steep.” (Gotta love how they want to try to devalue Hard Money lending, it’s actually kind of cute)

I asked why they would say that and they seem to think that borrowing money is cheap. It is, when backed by a bank that has Billions in assets. When you’re talking about a private money lender and a broker in the mix, there is a spread that is created so that they can earn a living lending. It is the epitome of investing. Banks have done it for years so they have enough that they can afford to make it cheaper. And then again there’s the whole banking system which we won’t get into at this time.

Cost Of Carrying Capital For Hard Money Lenders

What does need to be understood is that the cost of carrying capital needs to be figured in liberally into any formula that you use to “run the numbers” on your opportunities. If you’re trying to figure you’re getting a low interest rate simply because you think that’s how it should be, you will be disappointed more times than not and frustrated when it’s time to close and you can’t find a lender that will do your loan for less than 15% or 16%.

We work with numerous Active investors that figure their numbers on much higher interest rates so that they know no matter what happens short of the property burning down, they will have a good to great net profit on the back end of their deal.

Talking with a different potential borrower today I had to share that unless they see their way to a 30% net profit AFTER carrying costs, rehab costs and purchase price which should already be at a discount of at least 30%, I wouldn’t even make an offer. What got me to do that was the wife saying that they were ok just making $15,000 net on the deal. In my head after I heard her numbers I could only see them losing about 5,000, or more on that same property. There were costs that weren’t truly figured into their opportunity. She was thankful and they passed on the deal anyway.

Here’s the bottom line: It’s ok to shop for a deal, however remember that the same as you can say no, so can a lender, and if there isn’t an agreement there isn’t a loan and you could potentially lose money getting hung up on costs. Figure your numbers high and when you get them better at a lower rate, it’s a pleasant surprise that you can use to increase your net. Make it a profitable week.

This article was written by Michael Kaleikini, President and Chief Operating Officer of Hard Money Capital Group.  Michael Kaleikini is known as the Godfather of Hard Money Lending due to his expertise in originating, processing, underwriting, funding, and servicing hard money loan transactions.  Michael Kaleikini represents hundreds of hard money investors and originates more hard money loans in the United States than any other hard money and private money loan originators.  Michael Kaleikini is a financical writer and teaches hard money lending to attorneys, real estate agents, mortgage brokers, title agents, and other mortgage professionals.  Contact Michael Kaleikini at mikanui@gmail.com if you have any questions or are interest in becoming a hard money investor or are interested in hard money loans.

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Searching For A Hard Money Lender

Blog Fix Rehab Flip Loans Investing in Private Money Loans Investors Loan Servicing Mortgage Processing And Underwriting Purchase

The Etiquette Of Searching For A Hard Money Lender

Searching For A Hard Money Lender

Searching For A Hard Money Lender

Here’s another one for the “stories from the dark side.” It really lends to what kind of Business Etiquette you need to exercise when seeking funding in our industry.

Someone approached one of our affiliates recently looking to get funding for a deal in an area of Wisconsin that wasn’t exactly an easy place to get good values over $100K. This was a challenge admitted by the prospective borrower. In this area of Wisconsin it is pretty easily seen by even the “Z” word website that values were not quite what we would normally like to see. However, it was close enough that we could still see a way through to a deal.

Searching For A Hard Money Lender That Suits Your Project

After quite a few emails and phone calls, we were able to finally come up with something that underwriting was able to settle on as a viable risk to present to our investors. An LOI (Letter of Intent to Facilitate Lending) was generated and sent to the affiliate so they could pass it on to the prospective borrower. The Borrower apparently received the LOI, and then didn’t get back to us over a weekend.

Letter Of Intent

Letter of Intent, also known as LOI,  that we generate have generally a four or five day offer limit. (obviously we can’t just leave offers on the table; our investors wouldn’t appreciate it) This one had until the first of July to sign and make deposit for inspection so we could move forward with process and get to a close. Not a word over the weekend and when we reached out to the affiliate, they said the last they heard was that the prospective borrower would be calling last Friday; only, there was no call.

This left us with a bit of confusion and curiosity of course. Realizing that this is still a run of numbers before we find a viable opportunity to lend on, we figured this one had finally gotten to the point that everyone could win on this deal. After having spent a few hours researching the property and finding enough evidence to back up the value enough to make an offer, an offer is extended. Most times, borrowers who truly understand what they are getting return LOIs immediately and make deposit so inspections can be done.

Hard Money Investors

This however is not your normal borrower. This one decided that “shopping” was a better offer than what we gave. Please note, we are fairly standard along with most competitors that work with challenged credit or challenged equity investors. Many of our seasoned investors have a reserve to work with so they can put skin into the game as our investors desire. We explain that this is necessary in order for a loan to occur. This person decided that our offer wasn’t enough and when our affiliate finally got a hold of them, they at that time said they were going to look further and may come back if they can’t find more favorable terms. This was met with a bit of rebuke by our Affiliate on the fact of time wasted doing our due diligence and them not having the courteousy to at least call and discuss terms to see what can be negotiated. Instead this person decided to just leave our offer behind.

Hard Money Lending Process

I can tell you, this has resulted in us raising our rates and fees next time around. Because we will go through the process again. We’re not the only ones that would do this. Many would double what end up raising rates or fees to. We’re actually one of the nicer groups.

Here’s the point to this story: If you are seeking more favorable terms and may need to shop your deal around, let the hard money lender/broker know what you’re up to. Then they put time and effort into it to get to a point of making a generic offer over the phone. Enough for you to see if it’s something you would like to pursue with them. If you do as the above person did, you can expect to meet with resistance to do business the next time around. Remember, they have the capital you need. Treat them with respect even if you’ve run into a sheister or two. You never know when you find the right one that will work with you, if you treat them wrong, we all talk, your reputation will be sullied and you will find it harder to get funding.

Searching For A Hard Money Lender: Michael Kaleikini

This article was written by Hard Money Lending Expert Michael Kaleikini.  Mr. Kaleikini is a 15 plus year private money lending expert and the President and Chief Operating Officer of Hard Money Capital Group. Michael Kaleikini can be reached at mikanui@gmail.com.  If you are an investor looking to diversify your investment portfolio into private money loans and earn 10% or more in annual returns secured by real estate, Michael Kaleikini and his associates is your man.  Michael Kaleikini has a stellar national reputation among professionals of the real estate industry as well as hard money loan borrowers.  Michael Kaleikini is a household name in the hard money lending industry.  Michael Kaleikini also has a team of residential mortgage loan originators who are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, and Jumbo Mortgage Loans.

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Hard Money Loan Closing

Blog Closing Title

Every deal requires a bit of Savoir Faire: Hard Money Loan Closing

Private Money Closings

Hard Money Loan Closing

In hard money lending there’s always an element of flexibility that is needed to be able to get to the end result; a hard money loan closing. In order for that to happen the underwriter of a company or the lender need to know as much about a property as possible in order to issue a clear to close for the hard money loan closing.

Title Is Big Factor In Timely Hard Money Loan Closing

If you’ve been reading our blogs you know that checking title is essential to being sure that a deal will go. We have two right now where there is an IRS lien that needs curing and for some reason the IRS office doesn’t know how to write a proper payoff letter so that the title company will close and record the deal.  Why would this be such an issue? Not so much that the title company is nervous, but the IRS doesn’t know how to do its job…?? If someone from the IRS comes and says sorry you can’t let this go through, then the deal is off. If a court comes and says something similar a closed loan gets rescinded by court order and that deal is gone as well.

How To Avoid Issues With Liens On Title?

So what does one do when there could be a danger of this happening?

You have a few options: You can walk away from the deal (this is for both investor or lender), you can negotiate with the IRS to be sure that something viable and acceptable by title can be written so that you can move to close. (Be ready to do a lot of back and forth with this option) You could just move the deal to a different property and go for a loan on something completely different which would show that the other deal was a waste of time. (not highly suggested, but sometimes the only option leftover so no one loses out)

Solutions To Get To Hard Money Loan Closing

One way or another you need to be ready to be flexible. Now this is for both the active and passive investor.

As a private lender you want the deal to be as “Vanilla” as possible. But, c’mon now, if that were the case that it was a “no brainer” don’t you think that borrower would have gone to a bank? (at least the newbies would) You got into this to make higher interest rates than banks charge by ending to people that have less than perfect credit and you KNOW that they are hoping you’ll lend on the merits and value of the property.

As a borrower, you need to keep your head outside of the box, but not so far that a private lender won’t get what you’re trying to do. We get that a lot;; unrealistic borrowers is what we call it. They want higher LTV lending and when they get to us, the cost is high, the LTV isn’t enough, they want to do no money down. Etc.  Here’s what it means to be Savoir Faire; being flexible and amenable to the seller so that a true opportunity can be vet into a deal. Then, you take that opportunity to lend to someone like us, and we vet the property and a bit about you so our investors can see we’ve already figured a bit of the savoir faire for them and yet still have a secure deal. Then they lend. You get your funding and the deal is done. Hopefully you’ve figured you MAO properly so you’re netting at least 30%.

It means, be flexible, be ready for anything, check everything that is within reason, and make a choice to do business. Then when it’s all said and done you are looked at as an investor with savvy, and savoir faire. Not an easy title to attain, but quite doable.

This article was written by Michael Kaleikini, President and Chief Operating Officer of Hard Money Capital Group

Related> Title Insurance

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Hard Money Investors

Uncategorized

Hard Money Investors Take Heed

Hard Money Investing

Hard Money Investors

Interest in investing is getting heavier by the month as people are realizing that they have to take control of their own destinies with their financial futures. More and more people are understanding what it means to get in there and find out what they are actually making. (there are many that are still paying huge fees for brokers to lose their money, it’s true)

Benefits Of Hard Money Investors

So what can you as a private investor do to take control and further your financial stability for you and your family? Becoming a private investor is definitely a great place to start. It’s not rocket science as to how it works. It does take a specialist or broker to get it right on the paper work. (It helps if there’s an attorney on hand as well)

Rate Of Returns For Hard Money Investors

Historically the general populace was relegated to menial returns of 1-2 sometimes 3%. That was through the traditional CD or Money Market Account. Since private lending took flight and the banks made way for that kind of commerce available and possible, many of those that had those kinds of returns have changed their thinking and are moving their money to where they are making between 8-18%! How is this possible? Through using a broker that can vet opportunities to lend to Active Investors that want to “Fix & Flip” real estate, Private investors can change their financial destinies. IT is by securing a note and mortgage or trust deed that they are able to secure greater returns on their cash. Why not? Banks do it every day! Be the Bank!

Starting Out As Hard Money Investors

How hard is it to start? You can start with us here at Hard Money Capital group. We are after all a group of passive investors ourselves that invest in real estate and vet deals all day, all week, all year. We see the opportunities and vet them according to our investor risk tolerances. They vary, but with the way we usually set up opportunities to lend it is quite safe. Usual Loan to Value ratios are around 45-55%. Sometimes we will go higher for cash outs because we know investors willing to lend on properties that are in greater areas and easier to believe that the borrower is going to repay.

Sometimes there are other factors needed to feel comfortable enough to lend on a property.  We get that, and are willing to do a bit more than most just to be sure.

Hard Money Investors Training 101

Here’s the bottom line, if you don’t feel comfortable with your broker, and want to earn more than 1% while paying 10% as a fee, you need a new one. Come get to know us us and get a couple of our opportunities under your belt to see how we work. You’ll be pleasantly surprised. Not to mention the interest earned.

This article was written by Michael H. Kaleikini, President and Chief Operating Officer of Hard Money Capital Group

Related> What Are Hard Money Loans?

Related> Investing In Hard Money Loans

Related> Do I Qualify For A Hard Money Loan?

 

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How Should I Prepared When High Interest Rates Strikes?

Blog Hard Money Loans with Bad Credit Interest Rates Investing in Private Money Loans

When High Interest Ratess Strikes

Interest Rates On Private Money Loans

High Interest Rates On Hard Money Loans

I love talking with people; especially when I have the chance to help them secure a loan for an investment property.

That said, there’s always one thing that is a common thread in every conversation when it comes down to cost….Why is the interest so high?

I had a conversation today on that very subject and explained that some of it has to do with supply and demand. Some of it has to do with region, and some of it with risk.

Investing In Private Lending

When there are a lot of people looking to lend money, the high interest rates go down. Why? Competition. Everyone wants to earn a return on their investments and they know their cash on cash is worthless in a bank account, CD or money market account. So they turn to private lending.

What happens at that point is competition for borrowers becomes a pricing war. The borrower wins. As you go further east though, that changes. People are more into ownership than lending. For some reason it hasn’t caught on quite as well yet east of the Mississippi. So money there is a bit less abundant as far as lenders go. And conventional lending is still a hard nut to crack especially now that there are no more stated income loans or no or low doc loans either.

How Does Credit Scores Impact High Interest Rates

So whenI spoke to the person today about the fact that even though they have good credit they may still be paying 16%, they needed to understand the money isn’t as plentiful where they are at. Risk tolerances are much lower. (meaning they aren’t as willing to just lend money out to anyone on just any kind of property) Investors have gotten savvy to how things work and they want to be sure they are making a return on their investment.

Interest Rates On Private Money Loans

If you’re out east, well it gets much higher. Again, the law of supply and demand are in effect and there’s a lot more demand in the Midwest and east coast. That said, when you really look at what is required, there are ways to effectively reduce the actual interest rate you agreed to pay. Well talk about that next time.

This Article Was Written and Published by Michael H. Kaleikini, President and Chief Operating Officer of Hard Money Capital Group

Related> Fix Rehab Flip Loans

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Qualifying Income On Hard Money Loans

Blog Income Qualification Investors Mortgage Processing And Underwriting

I Have To Show My Income? Qualifying Income On Hard Money Loans

Income Qualification

Income Qualification On Hard Money Loans

Back in the good ‘ole days, doing a Private or Hard money loan with stated income was simple and qualifying income on hard money loans was not necessary due to stated income and asset based loans.  It really did depend on the equity in the asset. Times have changed since the 2008 real estate and credit meltdown. So did investor risk tolerances. When that happens, Investors want to see more on the borrower. Especially if they are not “Loan to Own” Lenders.

Investors Requirements On Qualifying Income On Hard Money Loans

No private money investor or hard money investor wants to go through the trouble of taking a property back.  Hard Money Lenders are not in the business of property acquisition and holding inventory no matter how much equity the investment has.  It’s costly and tedious. Not to mention if they do take the property back, what are they supposed to do with it? Sell it? That was your job.

Investor Risks With Hard Money Lending

Because of the crash and some of the bad actors in the arena using private money to gain funds and then walking away from deals taking the cash and not worrying about any of the consequences, Investors have become a bit more Due Diligence based. Yes the deal still hinges on the equity in the property, but many are now starting to ask about whether or not you can afford the payments for the loan.

They’re checking on whether or not your exit strategy is sound as well. Can you afford the rollover loan? Do you have enough credit to get that refinance and pay off the investor loan.

These are just safeguards that an investor will want to know before they lend you any capital for your next project.

Qualifying Income On Hard Money Loans May Be Required

So, yes you may have to show income in some way. Will it always be necessary, no. When the loan amounts get higher, there will most likely be a request to just prove you can afford it. Don’t take offense, just work with your broker or investor and show them you’re good for it. It’s not like you intend to defraud them. You’re in this to make money! Legally!

What’s asked for is usually corporate tax returns, if none then bank statements, if not corporate, then they may ask for your income. Just be ready, it happens. It’s for everyone’s security.

Get out there and find a deal that we can help fund for you!

Article Written By Michael Kaleikini, Chief Operating Officer and President Of Hard Money Capital Group

Related> What Are Hard Money Loans?

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Foreign National Mortgage Loans

Blog Foreign National Loans Investing in Private Money Loans

The Foreign National Mortgage Is Here And Growing

Foreign National Loans

Foreign National Mortgage Loans

All countries like investment from friendly foreign countries. After all it is better for someone to spend their money at our Walmart than their Walmart. Then it matters a little less that their country makes the items we are buying at our Walmart. At least it is our Walmart in Bollingbrook, Il or Cucamunga, California. Of course, American Made is Better, more expensive, but better because it is made here. With all that said, what better investment a Foreign National can make than to buy real estate in the good old USA? Of course, Toyota could open another plant in Lexington, Kentucky and employee thousands of people and support “kick back” to University of Kentucky basketball players. That might be better unless you the minority that still believes college is for education.

Requirements Of Foreign National Mortgage Loans

What is happening is people that live in China are vacationing in Las Vegas, NV. They are spending money in Las Vegas, NV. They are losing money in Las Vegas, NV. Why not buy a house in Las Vegas, NV? These gamblers need to stop throwing their money away and start paying Real Estate Taxes to support education.

The reality is most foreign Nationals that are purchasing homes in the USA have substantial down payments. The Foreign National Lenders have very little risk. Often the down payment requirement starts at 35%, and depending on credit, and immigration status can be bigger. The Foreign National lenders are getting double digit rates. The risk they have is minimal. Who walks away from a mortgage payment after putting 35% down on the purchase? How can the lender really lose money? They make the foreign national buyer pay for insurance, they have so much equity in the foreign national’s purchase that in almost any case the foreign national lender would have a very secure investment.

 Investing In The United States Through Foreign National Mortgage Loans

It’s also a great way for a foreign national to establish their intent to reside and do business in the United States. You are going to see more and more Foreign National Lenders and Foreign National Buyers in the near future.

Related> Foreign Nationals

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Hard Money Loan Default Interest Rate

Blog Hard Money Loans with Bad Credit Interest Rates Investing in Private Money Loans

 Hard Money Loan- What Is The Hard Money Loan Default Interest Rate Penalty?

Interest Rates On Hard Money Loans

Hard Money Loan Default Interest Rate

This is a simple answer but the negative impact on a borrower’s payment can vary dramatically.

The Default Interest Rate is the penalty interest rate that is charged above and beyond the current rate of interest of the Hard Money Note. This will vary dramatically between Hard Money Lenders and it is as important as any provision to be wary of and check out. If you are not certain, it is important to have an attorney review attorney, a mortgage expert, or some other person in the know review.

Hard Money Default Interest Rate Penalty Can Be Brutal

This default interest rate can be brutal. Here a recent example of a default rate I found that is being charged by a leading Las Vegas Hard Money Lender:

If you are more than 20 days late, your interest rate will increase by another 10-14%. This is called the ‘default rate.’ The default rate stays in effect until you bring all of your payments current. If you are going to be late, CALL US and tell us why. If we do not know what is going on, we will file a “Notice of Default” very quickly, and then you have to pay for that also.

I actually copied the above word per word from this leading Las Vegas Hard Money Lender. However, I am not citing where I received it from as copying their website address link to this article will only serve to give this lender more traffic. In this case I believe plagiarism is justified and morally correct.

Understanding Hard Money Loan Default Interest Rate

Just so you get the full picture your rate with this Hard Money Lender could be 18%. If you are less than 30 days late on your payment, your interest rate will jump to 28 to 32%. Let me reiterate: Your interest rate can jump to 32% without even being one month late. It isn’t even legal to report you to the credit repositories of Trans Union, Experian, and Equifax unless you are more than 30 days late.

Additional Fees Beyond Hard Money Loan Default Interest Rate

Plus, this Hard Money Lender will tack on legal, and recording fees which makes it even harder for you to catch up on your payments. You could be paying your Private Money Mortgage back at 32% for a long time.

Please make sure you look into the “Default Rate” provision and terms on your Hard Money Mortgage before you sign the closing documents. I will even review it for you for free. I am not providing any legal advice, but I will point out where this “Default Interest Rate” provision is in your closing documents. I will even contact your lender and ask them for such default terms if I can’t easily find them.

Related> Hard Money Capital Group

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Qualifying For A Hard Money Loan

Blog Hard Money Loans with Bad Credit Home Loan with Bad Credit

The Wince: Qualifying For A Hard Money Loan

Hard Money Loans

Qualifying For A Hard Money Loan

Ever have one of those moments when you’re doing an interview for a potential Borrower and you get to that question about collateral or credit or income that when the answer comes you do “the wince”?  This happens often in the Private Money Loan scenario.

You know it, or have had it happen. It’s that strange look you get on your face that the moment it happens and your mind immediately goes, “D’OP! OH! STOP THAT LOOK BEFORE THE CUSTOMER SEES IT!” Yeah….that one. It happens in like an eighth of a second. It’s quick and provided your customer isn’t looking, you might just get away with not having them go into panic mode and having to explain to them that it’s ok, you’ll figure out a way to make it work….maybe.

This also happens in private money lending. In fact more often than not, it’s the reason we choose to interview over the phone. Saves us the issue of having to explain the, “What does that look mean?” question.

I’ve had this wince happen for a few reasons:

  • The property is in an area that is truly undesirable to lend in. (this includes areas that are in recovery)
  • The collateral is just not holding enough value according to comparables.
  • The income just isn’t enough to cover the monthly payments

In essence, all we want to do is protect EVERYONE in the transaction. From Seller, to Investor, to Lender. We want people to make money but only if it’s done above board and truly viable. It’s our job to know what will work and what won’t. Even though we aren’t conventional lending, (Which takes a LOT more expertise) we still need to know enough that we can assess risk and see a way to a finish line.

Qualifying For A Hard Money Loan: Do You Qualify

As a borrower, you may wish to take those factors above into consideration before applying for a Private Money Loan and see if you qualify for a hard money loan.  Qualifying for a hard money loan is streamlined and the process is much simpler than qualifying for a conventional and traditional mortgage loan, but the fact still remains that the borrower still need to meet the qualifying requirements which are the down payment and able to afford the monthly payments until they execute the exit strategy.  When talking with a Broker or even directly to a Private Money Lender, you’ll want to be clear as to what you’re intent is. Having an equity partner is fine, just be sure it’s all clear.

Qualifying For A Hard Money Loan Requires Equity

Oh. By the way, Saying the words “GAP FUNDER” or “BRIDGE FUNDER” and not having them on the application is another way to get our spines shaking sideways. There are too many ways that gets used to create a 100% finance situation, thereby literally putting all the risk on the lender and none on yourself…don’t do it. Some Lenders have gotten wise to it and have clauses now in their closing packets that specifically state if they find out this actually becomes a 100% purchase deal, they can take declare a default and take the property. Will it take time to do? Yes. Will they go through with it? You tell me what you would do if you “had the wool pulled over your eyes”.

Don’t make “The Wince” happen. Put a smile on their face by being up front and knowing what you need to have to make a deal work.

Related> Hard Money Loans: What Are Hard Money Loans?

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