Sand Diego Hard Money: The Perfect Source for Bridge Loans
San Diego hard money is also called private money, and can be an ideal source for bridge loans. A bridge loan is another name to describe a short term loan. Bridge loans are usually repaid in under one year, but the repayment deadline can extend as far as two years.
Bridge loans are used for commercial and residential purposes.
Bridge loans are so-named because they are employed as a measure to bridge the gap in the interim while a borrower is seeking permanent financing. Because they carry a bit more risk than conventional bank loans, the fees and points associated with them are typically higher.
When a borrower needs money for a relatively short period of time, sometimes it’s prudent to seek loan money from private rather than conventional sources.
The following are some cases in which a person may use hard money for a bridge loan:
1. You need to close a purchase fast
2. To keep a property from being foreclosed upon
3. Refinance an existing loan that’s due or will soon hit a balloon period
4. Take advantage of an opportunity with a quick timeline
5. Tap into equity before selling a property with a cash-out loan
6. Have equity in a property and need a short term business loan
To be eligible for a hard money loan, you’ll need to show the following:
1. Equity
2. LTV ratio (Loan to Value) under 65 percent
3. Ability to pay the loan
In many situations, a property pledged as collateral may not have enough equity. In many cases the private investor may consider additional property as collateral and “cross-collateralize” several properties.
Although the loans can be processed quickly and are usually written for 12 months or less, it is important for the lender to completely underwrite the borrower, the property, and the credit of the borrower.
Usually the following items are needed to submit for a loan request:
1. 1003/Application (Lender provides)
2. Credit Report (Lender provides)
3. 2-6 Months Recent Bank Statements (Borrower provides)
4. Income Documentation (Borrower provides)
5. Purchase Contract (If applicable)
6. Appraisal of Property (If applicable)
7. Pro Forma (If applicable)
8. Executive Summary (If applicable)
9. Cost Break Down (If applicable)
Typically, a hard money loan can be completed approximately 7 to 14 working days after the lender has received all of the information from the borrower. As you can tell, private money loans close much more quickly than conventional ones. This is why they are a good alternative for those who seek a bridge loan.
Ultimately, they close fast and act as a good intermediate solution until permanent financing can be obtained. Like most loans, there are little or no upfront fees for obtaining a California hard money loan. Typically all fees will be paid through escrow at the close of the transaction.
If the loan is used to refinance a property, the fees can be refinanced back into the loan. If it’s a purchase loan as opposed to a refinance, the borrower will need to come up with some money for escrow before the closing of the loan.
Example
Refinance scenario: Desired loan amount of $100k, property value of $200k, fees of $10k = final loan amount of $110k with 55 percent Loan to Value (LTV)
Purchase scenario: $200k property value, $200k purchase price, down payment of $60k, $10 in fees = final loan amount of $140k, with $70k in escrow to be paid by borrower
San Diego hard money loans can be used for a number of purposes. This article explains the advantages of using hard money for bridge loans. Since hard money loans can be put together faster than bank loans, they are a common solution when temporary financing is necessary.
To ensure that you make the best loan decision, evaluate your situation thoroughly and come up with several possible paths for achieving your goals.
