Kern County Hard Money Loans
In the world of real-estate finance, the vast majority of projects involves mortgages. Mortgages are extremely popular forms of purchasing real estate because they allow buyers to acquire property they almost certainly not be able to afford without access to long-term financing. For most prospective real estate investors buyers, mortgages are a great choice.
There are some situations where traditional mortgages don’t work. In many situations where the investment property needs extensive repairs or for some reason is below market value, traditional mortgage lenders may view the deal as being too risky. In other cases, the buyer themselves may be viewed as too great a credit risk. If a buyer is involved in too many deals at once, or has highly variable income, traditional home lenders may not be willing to assume what they perceive to be a high level of risk to underwrite a mortgage.
In these situations and many others, a buyer may turn to what are known as hard money loans. A hard money loan is a real estate loan made by an individual investor or group of investors, usually on a short term basis. Because hard money loans come from individuals rather than huge corporations, the terms of the deal can be almost infinitely flexible. This allows creative real estate investors to structure deals in ways that are most likely to meet their specific goals. In exchange for increased flexibility, hard money loans often have higher rates of interest. But paying more interest is usually not a concern as these loans are almost always used as a kind of short-term bridge financing.
Kern County Hard money loans don’t involve extensive due diligence
One of the most attractive features of Kern County hard money loans is the incredibly fast underwriting period. Unlike traditional mortgages, which involves banks combing over everything from pay stubs to personal spending habits, hard money loans almost never involve extended due diligence procedures. This is because they are backed by real estate. In most cases, the value of the real estate being purchased supplies a good deal of the collateral. Some hard money loans are also collateralized against other real estate owned by the borrower. Because hard money lenders typically give loan-to-value ratios of between 50 and 70 percent, they typically don’t care about the borrower’s credit score, income or other cash flows. They know that if something goes wrong, they will easily be able to recoup their loan by selling the property that was offered as collateral.
Traditional lenders don’t offer loans against property which is being given as collateral. Hard money lenders do, and this one critical difference is what sets them apart from other lenders.
Hard money loans can give real estate investors the edge
Hard money loans have less due diligence involved, and thus you can get cash in hand VERY fast. In some cases, real estate investors who have established relationships with hard money lenders may be able to finalize new loans and get the money wired on the same business day.
For investors operating in a hot real estate market, this can make hard money loans the difference between getting a property or not. Most real estate investors ignore traditional lenders when trying to purchase the property. Often, most work with a hard money lender in order to purchase the property – and then later refinance with a traditional lender.
What are Kern County hard money lenders looking for
Kern county hard money lenders like Delancey Street care about one thing: the success of the project. When requesting for a loan, it’s your job to show why your project will succeed. Focus on how you’ll use the funds, and how you’ll repay the loan. Show a timeline that makes sense, and is rooted in in market data. The more facts and data you use to prove your point, the greater the chances of getting the loan. Often, the number one reason most hard money loans aren’t approved is because the real estate investor has no idea what he/she is doing. The investor doesn’t put forth a compelling reason why the loan should be granted, and how/when the loan will be returned.
One of the thing main things a Kern county hard money lender will look at is the value of the property compared to the loan requested. Ideally, the loan should be 60-70% of the property value. Many real estate investors want a loan that is 90-100% of the value of the property. Unfortunately, this is a very high loan to value ratio, and most investors will refuse to lend at such high ratios.