Hard Money is Competitive Money

Hard Money is Competitive Money

Hard Money is Competitive Money | Valor Lending Group

Are you having trouble getting your offer accepted?

Market seems too competitive and tired of losing to the “all-cash” competition?

Look no further, and fight back with a “same-as-cash” hard money loan.

Valor Lending Group has loan products available to make this process quick and painless. 

We offer EVERY mortgage loan in the book and work with the very best to get you funded and on your way to your next endeavor. 

VALOR LENDING GROUP IS SERVING UP NEW HARD MONEY MORTGAGE LOANS!

Hard money loans, also known as Bridge loans, Flip Loans, and Cross-collateral loans are types of loan programs that real estate investors often use. It is unlike a traditional loan. You cannot acquire one through any conventional lender as most traditional lenders do not offer hard money loans. Private individuals or companies are who you will deal with instead of banks when using a hard money loan program. Choosing the hard money loan route is generally quicker and more straightforward for many borrowers. Although it can be a quicker process, the interest and fees will be more costly.

Valor Lending Group has the right connections to get you one of our new hard money mortgage loans locked and loaded for you today!

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What you will learn:

• What a Hard Money Loan is
• Why you would want to use a Hard Money Loan
  • Speed
    • Same as cash purchasing power
  • Temporary Financing Solutions
    • Value-add/Property Stabilization/Fix and Flip/Construction
    • Borrower financials currently less than perfect
• What does a Hard Money Loan look like
  • Types of Hard Money Loans
    • Fix and Flips, Commercials Value Adds and Construction Loans
    • 1-4 Unit Residential Purchase and Cash Out Hard Money Loans
    • Commercial Hard Money Loans
  • Typical Hard Money Loan Terms
    • Terms
    • Rates
    • Terms
    • Loan-To-Value (LTV)
    • Property Valuation
    • Exit Strategy
• Hard Money Myths Debunked
  • 100% Financing-The Holy Grail
  • Hard Money Loans are designed to fail
• Finding the best Hard Money lenders

What is Hard Money?

Lenders that lend hard money are typically private investors or investor groups, pools of funds, life insurance companies, and even pension and retirement funds. Hard money loans are an alternative to traditional bank lending that allows flexibility and expediency.

Hard money lenders and hard money loans are not required to conform to the same guidelines as traditional financing, such as the standardized Fannie Mae and Freddie Mac underwriting guidelines for loans to be repackaged and sold on Wall Street. Put simply, a hard money loan is a loan that is secured by a “hard” asset – i.e., real property. Because hard money lenders secure their loans with real property as collateral, they are most concerned with a borrower’s equity in the property (or down payment for a purchase). The maximum amount a hard money lender is willing to extend – or leverage – is based on a percentage of the property’s value. Hard money lenders are most concerned about the Loan-to-Value (“LTV”), that is, the loan amount divided by the value of the property.

Why Use Hard Money?

Every well-equipped borrower’s toolbox should have a reputable hard money funding source. Although banks are usually able to offer lower rates, banks do not offer hard money loans, their loan programs don’t allow for the same flexibility hard money lenders can afford. In addition, traditional lenders have loan committees and a more involved underwriting process, and it is not unusual for both of these to delay the loan process. Hard money loans bridge borrowers from one type of financing to another.

The 2 main reasons to use hard money loans:

1) Speed

2) Temporary Financing Solutions

1) Speed: Same-as-Cash Purchasing Power 

One of the main reasons to use hard money loans is their speed. Hard money loans can be closed much quicker than traditional loans, offer in 1-2 weeks, sometimes quicker. Some of the best hard money lenders are able to make their underwriting decisions and issue a term sheet on the first phone call, and some are even able to fund loans in 24 hours! For those needing a quick close with minimal documentation, hard money loans are a great fit. 

2) Temporary Financing Needs 

Hard money loans are simpler and quicker than traditional loans, and there are two main categories of temporary financing situations in which hard money loans make sense: (1) Property needs to be stabilized; and/or (2) Borrower’s financials need to be stabilized.

(a) Value-Add / Property Stabilization / Fix and Flips / Construction

Hard money loans are particularly well-suited for situations in which the financed property needs to undergo some kind of renovation. This can range from cosmetic upgrades to full gut rehabs and rebuilds. The issue for borrowers in these situations is that traditional lenders base their funding decisions on the current value of a property.

Hard money lenders, on the other hand, are willing to base their funding decisions (at least in part) on the future value after renovated value (“ARV”) of the property. Hard money lenders are willing to lend on the riskier, future expected revenue of a property because they mitigate their risk with a lower LTV and charge higher rates.

Fix and flips are a classic situation in which a hard money loan makes financial sense. In these situations, the loan is based on the after-renovated value. Once the property is finished being rehabbed, and realizes its full income-producing capacity (“stabilized”), the hard money loan can be paid off in 1 of 2 ways: sell the property, or refinance with a traditional lender now that the as-is value supports the loan.

(b) Borrower Financials Currently Less Than Perfect

Hard money lenders are far less concerned with credit issues such as foreclosures, bankruptcies, late mortgage payments, etc., and have less stringent underwriting guidelines.

There are times when a borrower is simply unable to provide documental traditional lenders require, whether due to the nature of their business, or the fact that tax returns may not be an accurate reflection of the current financial situation.

Hard money lenders are willing to look past such credit issues where there is enough equity in the property, or a borrower has enough access to capital to make payments on the debt.

Hard money lenders typically do not want tax returns or employment/income info. If there is significant equity remaining in the property after the hard money loan is accounted for, some hard money lenders will refinance a property with nothing more than a Driver’s License, Preliminary Title Report, and a visual inspection of the property (a “drive-by appraisal”).

What Does A Hard Money Loan Look Like?

1) Types of Hard Money Loans

(a) Fix-n-Flips, Commercial Value Adds, and Construction Loans

Fix and flips, value adds, and other distressed properties, as well as construction loans, can be difficult to finance using traditional lenders such as banks because these types of properties are inherently risky. This is a prime example of where hard money loans can be used.

Construction projects are by nature short-term, and usually, these types of hard money loans are for terms of 18-36 months. Hard money construction loans are used to cover the cost of labor and materials for the development project, and sometimes also the land acquisition.

(b) 1-4 Unit Residential Purchase and Cash-Out Hard Money Loans

Hard money loans are commonly used to purchase 1-4 united residential properties quickly because their speed often provides same-as-cash purchasing power.

In addition, many investors utilize the equity in their property by “cashing out,” or placing a lien on the property in exchange for cash proceeds.

(c) Commercial Hard Money Loans

Hard money loans are also used for multi-family apartments, commercial, industrial, retail, raw law, and many other property types.

2) Typical Hard Money Loan Terms

(a) Terms

Hard money loans have terms of between 12-36 months but can be longer on a case-by-case basis. They are most often structured with interest-only payments, such that the loan balance is never paid down during the life of the loan, but rather includes a balloon note for the entire loan balance at the end of the loan term.

(b) Rates

Rates and fees charged by hard money lenders are almost always higher than traditional loans. For example, rates are generally between 7% and 12% but vary widely based on property type and use, location, and LTV. Home Loan Rates View More Refinance Rates

(c) Fees

Fees charged on hard money loans will generally include 2-4 origination points. Origination points are a percentage of a given loan amount. 1 origination points equals 1%, and for a $500,000 loan 1 origination point equals $5,000. Like traditional loans, hard money loans will also include processing, underwriting, and legal fees, along with all third-party costs such as title, escrow, appraisal, etc.

(d) Loan-to-Value (LTV)

Because the lending decision is based primarily on the asset, the LTV (Loan to Value) is one of the most important ways hard money lenders secure loan repayment. For a purchase, borrowers typically need a minimum of 20% down, and for a refinance they generally must retain at least 20-25% equity in the property.

(e) Property Valuation

Once a term sheet is issued, the next step is property valuation. Value is generally determined through a broker price opinion (BPO) or an independent appraisal. Sometimes if the LTV is low enough, around 50-60% or less, a hard money lender will do a “drive-by” appraisal, to confirm the property is substantially sound and in good repair consistent with the lender’s internal valuation system.

(f) Exit Strategy

Because most hard money loans consist of interest-only payments in which the principal balance is not paid down during the life of the loan, there is a significant repayment at the end of the term. But this is never cause for concern because savvy investors and the best hard money lenders require a clear exit strategy before funding a hard money loan.

Takeout loans are the permanent financing secured to replace the current bridge loan. This is one of the main ways the balloon payment at the end of a bridge loan is paid.

Another main way to exit a hard money loan is to sell the property. This is often a fix and flipper’s strategy—purchase and rehab a distressed property with financed funds, then sell the renovated property at a profit. A flipper could, however, choose instead to hold the renovated property as a rental, in which case a permanent takeout loan would need to be secured. Once the property is turn-key ready with renters lined up, a traditional lender will be more willing to finance the property.

Hard Money Myths Debunked

1) 100% Financing—The Holy Grail FALSE!

No hard money lender will provide 100% financing. In fact, many hard money lenders will require a higher down payment than traditional lending sources. Otherwise, there would be no equity available to mitigate the risks associated with default. 

2) Hard Money Loans Are Designed to Fail FALSE!

Hard money lenders are looking for a return on their money. In the event of default, they lose out on interest, the ability to place the money elsewhere, and time and effort to foreclose, all of which delay return on investment. Hard money lenders do not want to foreclose.

Finding the Best Hard Money Lenders

Many hard money lenders do not have a retail channel, meaning they will only fund loans procured through a broker. The best brokers spend many hours scouring thousands of loan programs to find the best rate and terms for their clients. Mortgages are largely fungible, and borrowers tend to be rate sensitive, so it is in the broker’s best interest to find the lowest rate and most favorable terms available in order to close the deal. Also, watch out for excessive upfront fees. Reputable brokers do not charge their fees unless and until the loan is funded (although in some instances a lender will require an application fee/deposit). Except for situations in which you are paying for a credit check, appraisal, or placing the funds into a separate performance escrow with a trusted escrow company, high upfront fees and costs can be a potential red flag.

Let us help you get started on one of our Hard Money Mortgage Loans TODAY! 

CONTACT US TODAY!

Call or email to discuss our New Valor Hard Money Mortgage Loans!

Recap of our Loan Products:

1. Hard Money Loans (20% down / minimal documentation) Typically Fund in 7-10 days.
2. Stated Income Loans (Great for business owners and self employed ) No tax returns!
3. 100% financing is available (we can cross collateralize other properties if there is enough equity)
4. Valor VA Home Loan 100% financing up to $2.5MM
5. Rental Property Loan – No tax returns or DTI calculation! Based on subject property cash flow – No DSCR Coverage needed!
6. Flipper & Rehab Loans (Flip a property with one of our many options)
7. 2nd Position Loans up to $5mm
8. Raw Land & Lot Loans
9. Ground up Construction for spec homes, custom homes and commercial ground up.
10. Farms, Vineyards, Ranches and Agricultural Properties (25-30% down)
11. 5% down Jumbo’s with NO MI up to $2mm / 10% down up to $3mm
12. Manufactured Housing / Mobile Homes (20% down / 600+ credit score)
13. Acreage Properties
14. Commercial Loans up to $500mm
15. 3% & 5% down Conventional Loans– LPMI (Lender paid mortgage insurance)
16. Foreign Nationals Loans (no social security or residency required)

We also offer:

1. Conventional Conforming Loans (under $647,200)
2. High Balance Conforming (from $647,200-$970,800)
3. Jumbo Loan Financing to $10 Million / Super low rates! / 10% down Jumbo to $3mm
4. FHA, USDA
5. Reverse mortgages up to $1 Million Value
6. Cash Out Refinancing

CONTACT ME TODAY for immediate attention to your scenario! 

**Rates and terms subject to change without notice**

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