Borrowers qualifying for a Hard Money Loan
The qualifying criteria for a hard money loan varies widely by lender and loan purpose. Borrowers credit scores, income and other conventional lending criteria may be analyzed. Clear Mortgage primarily qualifies a loan amount based on the value of the real estate being collateralized and the purchase price.
Typically, the biggest loan borrowers can expect would be between 55% and 70% of the property value. That is, if the property is worth $100,000, the lender would advance $65,000 – $70,000 against it. This low LTV (loan to value) provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property. Also, Hard Money lenders typically require a down payment from borrowers of 20-30%.
Hard Money Loan Structure
Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers around 60% of the market value of the property. For the purpose of determining an LTV, the word “value” is defined by todays retail market depending on the condition of the property.
Hard Money Rates and Points
The rate is not dependent on the Bank Rate. It is instead more dependent on the real estate market and availability of hard money credit. For the past decade hard money has ranged from the mid 12%–21% range. When borrowers default they may be charged a higher “Default Rate”. Some private lenders will collect a prepayment penalty and some will not.
Points on a hard money loan are traditionally 1 to 3 more than a traditional loan, which would amount to 3 to 6 points on the average hard loan.
ClearMortgage – Hard Money Funding Types
• Trustee Sale Funding
• Bank Owned Property Sale Funding
• Cash for Auction Purchases
• Cash Funding for Short Sales & REO Properties
• Immediate Funding for Time Sensitive Real Estate Acquisitions
ClearMortgage – Hard Money Loans – At-A-Glance
• No Points or Prepayment Penalties
• Monthly Interest Only Payments
• Max 70% LTV and Min 20% Down
• No Interest Reserve
• 6 Month First Position Note
• In House Recording, Delivery to Trustee, Property Insurance and Title Insurance
For Trustee Sale purchases
1a) Borrowers complete our 60 Second Online Application
1b) Borrowers call or e-mail us with the property address, purchase price, and estimated value.
2) We’ll run our in-house analysis and return a proposed loan amount
3) We’ll prepare docs and invite you to our office for signing.
4) At that time, borrowers will render a cashier’s check for the remaining down payment balance.
5) We deliver all payments to the trustee, allowing the borrowers to start marketing their property or focusing on your next buy.
Short Sales, REO’s, Standard Purchases, or Cash
Simply call or e-mail us. Once we agree upon a loan amount, you instruct the title company of your choice to send us a preliminary title report. We’ll prepare the loan docs and deliver them to your escrow officer, then wire the funds directly to the title company on the selected close of escrow date.