Hard Money Loans San Antonio
San Antonio Hard Money Lenders
Unlike traditional bank loans, hard money loans have very lenient requirements with flexible guidelines. For example, a traditional loan may have a minimum credit score requirement for the borrower. For a multi-unit commercial property, it may have a specific debt service coverage ratio and occupancy rate that needs to be met, and historical income numbers may need to show a history of stable income and expenses. These are only some of the many requirements that traditional lenders have for residential and commercial loans, and any deviation from these requirements may result in the loan being declined.
While hard money lenders have flexibility to think outside the box when reviewing your loan, they typically still require the deal to make sense in some way. For example, they will not simply lend on any property that is underperforming or in poor condition. There needs to be a clear turnaround and exit strategy in place. Hard money lenders may also have specific requirements regarding your financial situation, other aspects of your personal situation and the property itself.
Your Personal Finances
Traditional lenders may lend up to 95 percent or more of the sales price. In contrast, a hard money loan typically has a much lower loan-to-value. You should expect to make at least a 30 to 40 percent down payment on the project regardless of the property type. Some San Antonio hard money lenders may require even more money invested by you depending on the specifics of the loan request.
Hard money lenders analyze your financial situation to ensure that you have enough money available to make the down payment. In addition, hard money lenders generally have higher fees than a traditional lender. For example, you may pay an underwriting fee of four to six percent of the loan amount in some cases. Bottomline, you should have enough cash available to pay for this and other related fees.
Other Factors That Influence Our Decision
Hard money lenders review the entire loan to determine its strengths and weaknesses. There are specific requirements regarding liquid cash, but there are no minimum credit score requirements or income requirements. Furthermore, a borrower doesn’t not need to have experience with real estate investments or with renovations. While these are not specific factors that would result in an automatic denial, remember that the loan request must have strengths. For example, if the applicant’s income level is very low, it may be best if he or she had a huge cash reserve in bank and investment accounts. It may also help if an applicant has a proven track record of success with other similar types of projects. If multiple applicants are applying, the strengths of one applicant can balance out the weaknesses of another one in some cases.
As you can see, there is considerable leeway for a hard money lender to examine the financial strengths and weaknesses of applicants provided they have enough cash reserves to cover the down payment and loan costs. Likewise, a hard money lender can get very creative when analyzing different property scenarios. The ability of the applicant to show a positive picture of the property’s potential is important. In addition, the applicant needs to back this up with research and facts. For example, do not simply state that you plan to lease office space for $2 per square foot after a renovation. Instead, back up your statement by providing research showing actual market rental rates as well as market occupancy statistics. Remember that these should be for “like” properties. You cannot use market data for a Class A office building to support your projections for a Class C office building. Likewise, do not state that you can renovate a building for a specific amount of money. Instead, get a contractor’s written estimate for all of the work that needs to be done.
There are no hard and fast requirements for a hard money loan other than the down payment requirement. However, each lender is unique, and some lenders may have specific factors that they look for in each loan that they approve. Generally, hard money loan requests are reviewed on a case by case basis.
What to do next
Delancey Street is a premier San Antonio hard money lender that can help with your next residential or commercial property. Regardless of the loan amount, we can help you get funding. The only way to know if you’ll qualify is to contact us. We have experience handling tough potential deals. We understand the intricacies involved in underwriting “potential,” opportunities that need nurture.
What Hard Money Loans Offer That Mortgages Don’t
Hard money loans usually aren’t advertised or as well-known to the public as mortgages because they work a little differently. They’re secured loans which rely mostly on using the property as collateral for financing. Mortgages are also secured loans and the property is used as collateral in their case; but since banks generally don’t want to foreclose on properties, the borrower has to go through strict financial background checks and complete piles of documents, and then wait weeks or maybe months before they’re approved and get their funds. With hard money loans, there still is some paperwork, and generally the lender does want to know that you’re in good financial standing; but usually their approvals take a much shorter time, and they’re usually willing to overlook some credit problems in the past. Usually hard money lenders want to know things like what will be done with the property you are purchasing, and what its after repair value (ARV) will be.
Investors Who Use Hard Money Loans
Hard money loans can be structured in different ways for different real estate needs. Besides your regular investors and fixer-uppers, contractors and even regular homeowners who might be at risk of losing a home they have substantial equity in might use a hard money loan. Acquisition loans are usually the standard type of hard money loans used for property purchases that while they could be used for just about any property flipping or construction project, they’re designated as “purchase only” loans. Construction loans tend to be the kind of hard money loans used when a major property construction is underway that may take a little more time to develop and hence a little longer to repay the loan. Bridge loans are used as temporary loans that are secured by properties you already own, and usually they’re intended for needs you might have in between projects such as beginning development of your next property while you’re waiting for a current one to sell.
Why A Hard Money Loan May Not Be Right For You
Hard money loans certainly are a great source of funding if you know what you’re doing with property flipping or getting returns on investment through leasing out. But you need to remember these loans are usually only intended for very short-term use with some only lasting for 6 months, and the ones with longer terms usually going no more than two years. And because they’re considered to be more risky loans, the interest rates will usually be fairly high reaching more than 20℅ annually in some cases. The good news is some hard money loans do have flexible terms where you only need to make interest payments while your property is being completed, and then when it sells you can pay off the principal. But also be aware hard money loans will usually only finance up to about 75℅ of the property at most which means you’ll need to make a significant down payment to complete the purchase.
Finding a hard money lender in San Antonio usually does mean looking outside your bank. The good news is finding a hard money lender in your local area may be easier than you think. Sometimes various investment firms and brokerages make hard money loans, and sometimes realtors know local investors who also offer them. If you get in touch with one, make sure you’ve put together a favorable loan request form with detailed plans on what you’re going to do with the property, and then check with them on what kind of financial documents they need to see from you.