Hard money lenders near me

Is it important to look for hard money lenders locally?

Yes. The short answer is definitely yes this article will explain why it vital to look for hard money lenders near me. Unlike conventional loans that could be arranged on your property by lenders located anywhere in the country, hard money loans are mostly done by local hard money lenders. Your chances to get your hard money loan faster and with better terms, is better with local lenders in most cases. There are situations when a national hard money lender could be a preferable choice; therefore, regional lenders and nationwide lenders should not be ignored when you are searching for a loan. In practice if the property is California make sure to include “Hard money California lender” in your search. And better yet include the city as well e.g. “Hard money lenders in Los Angeles”

How do hard money lenders work?

To decide when to shop locally or shop for lenders who lend nationwide, a better understanding of the funding sources and how they work is required.

Hard money lenders initial finding of LTV (Loan to Value)

When underwriting a hard money loan, the equity in the property is determined by its LTV (Loan to Value). As soon as the hard money lender receives an application from a borrower, he immediately checks the property value online to verify its value.

With sufficient equity (low LTV), the loan will be approved; without enough equity (too high LTV), the loan will be denied.

Loan to value- the key to every hard money loan.

The LTV (Loan to Value) is the ratio between the loan amount and the property value. Most hard money lenders will lend up to 65% LTV. Few will go up to 75% LTV. in exceptional cases, and for Fix N' Flip loans, lenders and hard money brokers could go up to 80% LTV, 90% LTV. Even 100% LTV when investors consider future higher after-repair- value and or encumbering an additional property to secure the loan ( blanket loan).

Calculating Loan to Value (LTV)

Example of lenders calculating LTV:

Loan amount $300,000 property value $500,000 the LTV is $300,000/ $500,000= 60%

If the loan amount requested is $400,00 for the same property than $400,000/$500,000= 80%

Since LTV is the most critical aspect in approving any hard money loan. The evaluation of the property value becomes the main focus of the hard money lender

Besides LTV, what other factors affecting hard money loan approval?

About 18 factors could determine the approval terms of a hard money loan, but the most important one is the LTV (Loan to Value). Most of the factors below will not affect whether or not the loan can be funded but only affects the loan approval rate & terms. Some characteristics and a combination of factors could increase or decrease the maximum LTV the lender is willing to lend.

  1. Property Type
  2. Location
  3. Max LTV
  4. Min Fico
  5. property condition
  6. Loan amount
  7. Loan position
  8. Income and expenses
  9. income verification
  10. cash out
  11. Citizenship
  12. Occupancy
  13. Eligibility
  14. Funding time
  15. Reserves
  16. other real estates
  17. Bk and foreclosure
  18. Purchase or refinance

Hard money sources of funds

To fully understand why searching for "hard money near me" is essential, you need to know how the three sources of funds play an important role in determining the loan request's approval faith. Hard money lenders have access to one or more of the following funding sources:

  1. Private Investor
  2. A group of private investors
  3. Funding pool

Hard Money brokers can also refer the loan to another broker/ lender who gets the funds from the above three money sources.

Pro and con of lenders using funding pools

Nationwide lenders and large companies normally use a funding pool to fund loans. The benefit of using the pool funds is that the lender already has the money ready to fund. The lender does not need to call on private investors individually for each loan to collect funds and wait for the individual private investor to review the loan and approve it. The disadvantage of using the pool funds is that the pool's lending guidelines are strict and unbendable. If the property or the borrower qualification comes short of the strict underwriting guidelines, the loan will be not be approved. Another disadvantage is that the pool can dry out-, be out of funds, or shut down due to some economic downfall or management disputes. In 2020 many pool funds suspended all funding because of covid -19 uncertainty. Not having the big guns competition made it a boon for many local mom-and-pop hard money brokers.

Pro and con of lenders working with individual private investors

Local Brokers who work with local private investors have more leeway in underwriting the hard money loans. For example, after the loan request was declined three times by three prominent national hard money lenders, the borrower decided to call on a local hard money broker. The broker arranged for a private lender, who lives close to the borrower's property, to visit the property and inspect it. The private investor met the borrower face to face. After understanding the borrower's objective for the loan, the private investor agreed to fund the loan even though LTV was almost 75% and the borrower did not have perfect credit.

Pro and con of lenders working with groups of private investors

The benefit of working with groups of private investors is the ability to fund bigger size loans. Individual investors are limited in many cases from funding larges size loans. To accomplish the task of financing, the broker combines funds from several investors who share the loan and divide the interest every month. The disadvantage of such an arrangement is that it can take a little longer to fund because each investor needs to agree and be in town to wire the money to the title company.

Some hard lenders have access to all three sources of funds. But still, that does not mean that these lenders can arrange a better loan than a local small-town hard money broker who may have the perfect private investor for the property and the borrower.

Motivated Lenders VS Dormant Lenders

Not all private investors share the same level of enthusiasm to arrange loans. Availability of money, market conditions, and the lender's physical and emotional state always affect the loan approval's terms and speed.

A highly motivated lender who also has experience in the hard money can perform miracles on loans that otherwise doom to be declined by dormant lenders.

The lending industry is dynamic and fractionalized. Some old-time lenders who used to be aggressive five years ago are now dormant, and new lenders pop up left and right with new programs

“Motivated hard money lender instill confidence”

What does a borrower seeking hard money need to know?

Without the technology to monitors lenders funding capabilities, it isn't easy to decide who to trust.

Lesson #1, it is impossible to find the best lender even if you apply and spend hundreds of hours with hundreds of lenders

Lesson #2 You need to inquire with many local lenders who are near you.

Lesson #3 You need to try national or regional lenders wh wh may have better programs.

Lesson #4 Lendersa software searches and automatically requests quotes from all lenders in your local area and all the regional and national hard money lenders matching loan criteria to your loan request.

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