Market and Investment

San Diego hard money is also called private money. This can be a great funding source for bridge loans. A bridge loan is a phrase used to describe short term loans. Bridge loans typically have repayment terms of 12 months or less, but the deadline sometimes runs as far as 24 months.

These are used for commercial and residential financing.

Bridge loans are typically used as a stop gap measure until a borrower is able to secure permanent financing. Since these are short terms loans, they typically carry points and fees that are a great deal higher than conventional bank loans.

In cases when a borrower needs a short-term loan, it’s sometimes necessary to find private money sources to get a loan.

The following are some examples of when someone might need hard money for a bridge loan:

1. You need to close on a purchase quickly

2. Save a property from going into foreclosure

3. Refinance a loan that is coming due or approaching a balloon period

4. Need to take advantage of a situation with a short time line

5. Tap into equity before selling a property with a cash-out loan

6. Get a short term business loan secured by equity in your property

For hard money loan eligibility, you must prove that you have the following:

1. Equity

2. Loan to Value (LTV) of less than 65 percent

3. Ability to pay the loan

Oftentimes, a given property that is already pledged as collateral may not yield enough equity. In these cases, a private investor may be willing to “cross-collateralize” several different properties to make up the difference.

Though these loans are processed quite quickly and written for a short term of just 12 months or less, they must be fully underwritten by the lender for the borrower, the borrower’s credit, and the property.

Usually the following items are needed to submit for a loan request:

1. 1003/Application (Lender must provide)

2. Credit Report (Lender provides)

3. 2-6 Months Recent Bank Statements (Borrower provides)

4. Documentation of Income (Borrower must provide)

5. Purchase Contract (If applicable)

6. Property Appraisal (If applicable)

7. Pro Forma (If applicable)

8. Executive Summary (If applicable)

9. Cost Break Down (If applicable)

The typical time frame to complete a hard money loan is usually 7-14 business days from the time the lender receives all the borrower information. As you can see, private money loans close much faster than conventional loans, and for that reason private loans are a good solution when someone is seeking a bridge loan.

Ultimately, these types of loans close faster and are a good option for bridging the gap until permanent financing is in place. As with many loans, there are typically few or no fees that must be paid up front when it comes to a California hard money loan. Loan fees are paid through escrow when the transaction closes in most cases.

If the loan was obtained for a property refinance, fees can often be rolled into the loan. But, if the loan is for a new purchase, the borrower must be able to bring money to escrow before the loan closes.

Example

Refinance example: $200k property value, $100k desired loan amount, and $10k in fees will result in a final loan amount of $110k at 55% 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 can be used for various projects. This article shows the benefits of using hard money for bridge loans. Because hard money loans can be organized quicker than bank loans, they are often used in situation where temporary financing is needed.

To ensure that you make the best loan decision, evaluate your situation thoroughly and come up with several possible paths for achieving your goals.