Residential Hard Money


In this discussion, as it relates to our discussions pertaining to real estate finance, we are going to discuss residential hard money lenders. In some of our previous works we have discussed the usage of a hard money mortgage, however, in this specific piece of focus specifically on issues pertaining to working with residential hard money lenders. In theseinstances, residential hard money lenders are used for a number of loan properties purposes including the fact that people do not enter foreclosure providing them with the financing that allows them to be financed through traditional bank lending channels. Additionally, residential hard mortgage lenders that focus on granting hard money typically focus on working with real estate investors as well so that highly undervalued properties can be acquired quickly with the intent to refinance them later. Pertaining again to this specific discussion, we will focus on the usage of residential hard money lenders as it relates not only to give the issues such as foreclosure but also issues pertaining to the acquisition of residential real estate.

 

First, we will discuss the usage of residential hard money lenders as it pertains to the acquisition of real estate for investment purposes. In many instances, especially given today's economic climate, there are a number of deals out there as it relates to the purchase of single-family homes, duplexes, triplexes, and other properties that have less than five units. As such, and the number of foreclosures that are occurring within United States, many banks and individuals are looking to very quickly divest these properties at a substantially lower rate than the free market value. In some instances, especially when it is required that you'll need to purchase the property quickly without going through normal lending channels, you can turn to residential hard money lenders that typically provide you with a loan is equal to 65% of the fair market value of the property. As we just mentioned, many banks and individuals are at this time looking to divest properties for $.30, $.50, up $.60 on the dollar. As such, if you are in need of a quick financing in order to acquire a residential piece of real estate then working with a hard money lender that can quickly supply the capital you need to purchases property may be your best interest. However, typically residential hard money mortgages are only designed to last six months to one year. In some instances, hard money in lenders may provide you with loans that are on two year terms. The usage of residential hard money lenders is a very expensive proposition. You can anticipate that if you are acquiring a real estate investment property with hard money then you will need to pay up front fee that is equal to 4% to 6% of the total face value the loan plus in ongoing interest rate of 11% to 20% on a per annum basis for the debt obligation have undertaken. As such, it may be in your best interest to use hard money very sparingly in order to complete initial acquisitions of investment properties with the ultimate intent of using traditional lending channels to refinance a residential hard money mortgage that you took out in order to acquire a specific piece of property. Residential hard money lenders are not in the business of providing loans for a long-term period. Additionally, you should be aware that if you do use residential hard money lenders for your ongoing real estate investment activities there may be prepayment penalties if you are able to very quickly refinance home loan that you talk from a hard money lender. These penalties can range anywhere from 1% to 3% of the loan amount on top of the initial 4% to 6% that he paid at the time of the hard money mortgage closing.

 

Additionally, would like to discuss the typical profile of a residential hard money lender. In some instances, these lenders consist of simply individuals that have a significant amount of money that they want to loan out while concurrently having a piece of property that as the collateral for the loan. Again, one the reasons why residential hard money has become very popular over the past few years is due to the fact that there are substantial fees and interest that are associated with this type of financing. Additionally, there are number of aggregated funds of individuals and companies that are looking to generate tremendous returns on their investment over a one year to year. When you're looking for residential hard money lenders then you may want to approach a residential mortgage brokerage firm in order to secure this type of financing. Again, given the current credit environment, many traditional mortgage firms have worked with a number of different individual hard money lenders and funds that specialize in granting hard money so that they continued their business as a mortgage broker. Typically, if you do decide to use residential hard money in order to acquire a real estate investment property then you can approach a mortgage brokerage firm that specifically specializes in placing hard money funds. Typically, banks and other traditional financial institutions stay away from hard money lending due to the exorbitant fees and interest that interest rates are charged in regards to providing this type of capital. Additionally, traditional financial institutions are required to abide by certain restrictions as to how much they can charge for mortgage and the upfront fees that, at the time of a mortgage closing. As such, many residential hard money lenders operate outside of the sphere of a traditional financial institution due to the fact that the risks associated with granting this type of mortgage are significantly higher than that of a traditional thirty year mortgage. It is imperative that if you do decide to work with a residential hard money mortgage lender then you have an attorney appropriately screen all of the contracts that are wired in order for you to secure this type of financing. This is especially true since you will most likely be working with a number of individuals as well as aggregated fund companies that specialize in providing, again, this very expensive type of presidential acquisition funding. Again, the fees that are associated with working with residential hard money mortgage lenders is extremely high and in many instances there may be hidden fees within the contracts that you are signing as it pertains to securing the capital you need to acquisition of residential property. Unlike traditional financial institutions that have extensive legal departments and standardized contracts for the funding that they provide, residential hard money lenders typically work on the smaller basis and have more complex rules as it pertains to the specific mortgage at the granting to you.

 

In the second part of this article, we intend to discuss the usage of residential hard money lenders as it pertains to avoiding foreclosures. However, it should be first noted that if you are reading this article with the intent to acquire hard money in order to act as a bridge financing facility so that you can refinance your existing mortgage which is causing issues for should absolutely speak to a certified public accountant, credit specialist, or  foreclosure specialist as there are now a number of programs at the federal and state programs available that will allow you to effectively work with your financial institution to adjust the terms of your mortgage so that you will be able to remain in your home and avoid foreclosure process. Some of these programs include the HAMP program as well as several other federal programs that have been signed into law over the past three years. However, if you do decide to use residential hard money mortgage lenders in order to refinance your property then again you will be required to provide an extensive amount of documentation regarding the specific residential property that you own while concurrently showcasing your personal income so that the lender can ensure that they will be able to receive timely payments on any credit obligation that you undertake. Additionally, many hard money lenders especially as it now relates to residential properties are requiring the use of credit scores when making a lending decision. Approximately three years ago, prior to the massive downfall in the value of residential real estate, hard money lenders were far more concerned with the underlying collateral rather than the individual credit of the borrower. However, this is no longer the case to a certain extent. One of the reasons why he receiving money from a hard money lender is so expensive is that your personal credit is far less of a factor when a lender determines as to whether or not to grant the mortgage. They primarily focus on the underlying collateral, free-market value of the collateral, and the amount of money that they will have invested in any specific property in regards to generating the highest possible return on investment. Using residential hard money lenders for the acquisition of investment properties, you will be required to pay the same 4% to 6% of closing fees as a function of the face value of load as well as a very high interest rate as it relates to your monthly loan payments. As such, you should very carefully weigh the use of residential hard money mortgage lenders when determining whether or not to use then in a capacity to avoid foreclosure, finance or property, or for any other type of purpose for which you're seeking alone.

 

When you are seeking to use residential hard money for acquisition purposes or for refinancing purposes, you will still need to provide the lender with all of the same documentation that you would normally provide to a traditional lending institution that would grant you a standard mortgage. This documentation includes income tax statements over the last three years, your credit report among the three major credit heroes, as well as any analysis of the property which you are requiring for refinancing. In regards to using residential hard money mortgage lenders for the acquisition of investment properties you also need to provide the potential funding sources with a complete history of the rental income for the specific property that you are seeking to acquire. This even applies to single family properties that have not traditionally been used in a capacity for generating rental income. In this instance, you'll need to do an extensive amount of research for what comparable homes went for within the same geographical area that you're operating within. If you are uncertain as to how to tabulate what the potential that could be acquired using residential hard money lenders for the acquisition of single family homes and you can hire a property appraiser backing create this estimation for you. In any event, you're still going to need to hire a property appraiser in order to provide the potential hard money funding source with the analysis of the underlying collateral that will secure the funding that you're seeking.

 

 

In regards to multifamily properties, typically the current owner of the property will have extensive records pertaining to the rental, delinquencies of tenants, property taxes, utilities, and other expenses that are seceded with the ongoing operations of that specific investment property. Much like any type of residential property acquisition, especially when you're seeking to generate income from tenant, you need to make sure that all of the free cash flow will be more than enough to continue to pay the debt obligation that you undertaken in order to acquire the property. This holds true for any mortgage that you undertake, but it is especially true if you undertake a residential hard money mortgage as the expenses associated with this type of financing are tremendously higher than traditional mortgages.

 

Returning to our discussion of sourcing residential hard money lenders as it pertains, again, to your investments acquisition operations as well as using residential hard money mortgages for personal financing purposes. Again, you can approach a well established mortgage brokerage firm that has an extensive number of contacts among these types of lenders so that they can source the financing you need. It should be noted, that using a mortgage broker when sourcing residential hard money mortgage lenders may actually make the process more expensive as knowledge you need to pay large upfront fees to the specific lender you also need to pay substantial fees to the mortgage broker that arranges this type of credit facility. This is especially true because often times the mortgage broker needs to work with a number of different individual lenders to create a pool of capital that is necessary in order to grant you the hard money mortgage. However, this is not always the case as there are a number of hard money lending funds out there that specialize in providing this type of financing, however the fees associated with a mortgage broker will be expensive due to the fact that only can this type of financing is extremely competent at it. Recently, and with some of the clients we've worked with in the past, we've learned that there are a number of websites that are operated by residential hard money mortgage brokers that have worked directly with individuals in order to place the specific capital that they are in need of for the quick acquisition of capital for foreclosed residential and commercial properties. It should be noted that some of these websites, operate on a fly by night operations that are seeking to obtain very high upfront fees prior to securing any type of capital on your behalf. As we've discussed before as it relates to commercial loan brokers is that you should not pay upfront fees that are exorbitant prior to receiving any type of capital for your real estate investment operations. However, certain upfront fees will apply as it relates to pulling your credit report, completing a property analysis, completing a home inspection, as well as completing a property appraisal are not unreasonable. However, any of these upfront costs should be limited only to those in regards to developing the appropriate documentation that is needed when approaching a residential hard money mortgage lender or any other type of funding source. Additionally, many upfront costs that you will incur as you're working with residential hard money mortgage lenders are a one time and just one time expense. For instance, if you are working with a specific residential hard money mortgage lending group then all the documentation that you put together in regards to securing and lend a lending decision can be used among other lenders should that specific funding source that will entertain your credit request. As you can see, isn't it is imperative they do not pay a capital brokerage firm in fees and the city specifically related to the documentation needed to render a lending or an investment decision.

 

Additionally, in many states the sourcing and providing of residential hard money mortgages is regulated by state law. As such, when you're working with a residential hard money lender or with a mortgage broker that is sourcing this type of financing on your behalf and you absolutely should make sure that they have the required licensure in place in order to do so legally. In many instances, both the lender as well as the broker, especially the introducing broker, they need to be licensed by the United States banking division. Many states operate their banking divisions under several hundred different names, however it Internet search the opinion states name as well as banking regulations will bring up the appropriate web portal that is managed by the state that shows you all of the applicable laws as it relates to residential hard money lending. Additionally, you can frequently type in the name of the lender and applicable broker directly with on a states banking portal to see if this firm is appropriate to appropriately licensed by the state. Finally, if they are licensed by the state you may also be a will to see the types of transactions that they have closed in the past, the transactions that they have closed recently, as well as seeing if the firm has had regulatory infractions since they began their business operations. Much like our discussions as it pertains to securing business capital from a broker or through a private lender, you should be very aware of the fact of working with a licensed lender/broker and that they have a reputable track record as to their specific business operations.

 

In many of our for coming discussions, with a focus on the usage of residential hard money mortgage lenders as it pertains to obtain large scale residential properties as well as bona fide commercial properties that produce rental income. Many of the same topics that we discussed as it relates to residential hard money lenders will be touched upon as these same laws are generally applicable as well as the principles relating to hard money lending a generally applicable to commercial hard money mortgages as they do for residential funding. Thank you again for taking a look at articles pertaining to everything relating to finance, and again, we look forward to having you read new content, as it relates to residential hard money mortgages, we will continue to produce very significant timeframe.

 


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