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What is a 'Hard Money' loan?
A 'Hard Money' loan is a loan based on real estate collateral. We don't know anyone making unsecured hard money loans. In fact the term 'unsecured hard money loan' is an oximoron.
Since the collateral is sufficent (in theory) to recover the original investment if the borrower defaults, other borrower qualifications are minimized. Credit history and credit scores are not important. Borrower income is still a factor in many situations, but not as important as conventional lending, and not considered at all in some situations.
For further reading visit the Wiki Hard Money Definition
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Do you cooperate with other mortgage brokers?
Yes, if you need a hard money source for a client or other contact, we will act as broker and pay you a percent of the loan fee if you are properly licensed. A complete package is not nesseccary. Just fax us a 1003 application or give us the information you have over the phone.
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How much mortgage can I get?
We consider lending up to 65% of the property value. In the case of a 2nd or 3rd mortgage you must deduct the balance of the senior loan(s) when calculating how much you can borrow. Our 65% maximum does not mean we lend 65% in every situation, or on all property types. We will increase our maximum LTVs back to 70% when real estate values have stabilized in our lending areas (California, Arizona, and Nevada).
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How do I prove my income?
If you are employed, we can take a pay check stub showing year-to-date income.
If you are self employed, we accept financial statements, bank statements, tax returns, etc.
If you are on fixed income, such as social security or disability, we nee the yearly award letter.
If you are unemployed, we may accept past employment income as your qualifying income, if documentation is provided.
Letters of explanation may be acceptable when income is sporadic, temporarily reduced or suspended, or not verifiable by regular means.
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Do you make loans based on 'After Repaired Value'?
No. All loans are based on the current 'as is' property value or purchase price. We are not a rehab or construction lender and do not have the capability to monitor such projects. Loan proceeds can be used for rehab, repairs, or additions, but the 'as is' value is still used in our underwriting decisions.
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Do you make purchase money loans based on the appraised value or the purchase price?
We prefer to use the most conservative ("as is" value or purchase price) value. We do not make purchase money loans without a down payment, a tie-in property as additional collateral (blanket loan), or a seller carry 2nd for 30%+ of the selling price. Additional tie-in collateral most have sufficient equity to make the transaction work.
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Prepayment charges...
In many cases lenders will protect their interests by attaching prepayment charges to the initial period of a mortgage. The charges are also known as "prepayment penalties." The state of California has maximum limits for prepayment penalties on loans secured by 1-4 unit residential property. Our loans are written to conform to the California statutes.
Prepayment penalty terms are disclosed in the Note and the Mortgage Loan Disclosure statement. Prepayment penalties are negociable with the lender. In some situations a penalty can be waived by accepting a higher interest rate or paying extra points.
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Do I need to pay for anything up front?
We do not require any fees up front. Our fees are taken out of the loan proceeds upon close of escrow. Occasionally, you may need to pay an appraisal fee up front when an outside apppraisal is needed, or if required by the appraiser used. Such fee would be paid directly to the appraiser, and not Lafayette Financial.
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Do you offer interest only payments on your loans?
Yes, we are usually able to offer an interest only payment option to borrowers.
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How long can the term of the mortgage be?
The loan term can be from 6 months to 5 years. Longer terms are considered when compensating factors exist.
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Higher Lending Charges...
Hard money and Private money loans are more expensive. Our rates and fees are NOT competitive with banks, government, or other conventional lenders. If you qualify for a loan from one of these sources, we recommend staying away from hard money and private money loans. The only exception is if you need money quickly.
One way we can keep charges to a minimum is by offering 2nd and 3rd mortgages. The advantages are two fold: 1) if you have a low interest 1st mortgage, you can keep it and only pay higher interest on the cash out portion of your equity, 2) Closing costs are reduced because the loan amount is much smaller. It is less expensive to pay 10 points on a $50,000 2nd mortgage ($5,000), rather than 5 points on a $500,000 1st mortgage ($25,000).
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Who orders the appraisal?
We handle our own appraisals. Usually, we do an in house appraisal when dealing with a typical property for the neighborhood and sales comps are easy to find. If this is not the case, we will order an appraisal with an independent licensed appraiser. We do not recommend borrowers to order their own appraisal. We, like other lenders, are suspicious of appraisals ordered by borrowers.
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What other fees do you charge besides your points?
In addition to our loan origination fee quoted to you in the form of points (a percentage of the loan amount), we charge a credit report fee, document preparation fee, and an appraisal fee. These other fees usually add up to $425.00. Third party fees for title, escrow, recording, signing, courier, etc. is usually around $1,000 to $1,500 depending on the loan amount.
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Do you report to the credit agencies?
No. We do not report payment history or any loan information to any credit agency. Credit history can be verified by faxing a Verification of Mortgage form to us with the borrower's authorization.
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What happens if I can't afford to make my monthly mortgage payments?
Mortgage payments should always be your top priority. If you are unable to pay all your bills, make your mortgage payment first. The more equity your property has the more you stand to lose through foreclosure. Also, late fees, collection costs, and foreclosure fees are chargeable to your mortgage account. These fees can add up quickly, compound financial difficulties, and hurt your ability to catch up after falling behind.
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How long is the loan process?
It typically takes 1 1/2 - 3 weeks from start to finish. We give approvals in 24 hours. If you need funds faster becasue of an impending foreclosure sale, or other emergency situation, we can cut the process down to 6 business days depending on title conditions.
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Can I qualify if I am out of work?
We have done loans for people between jobs. If you can provide a two year income history we can use it on the assumption you will become employed in a similar position, earning a similar income. This is on a case by case situation. Please call our office to discuss your specific situation.
Another possibility for unemployed borrowers is to have a co-signer. Co-signers do not need to be on title to the property.
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Will you pull my credit report when I apply?
No. Credit is not neccessary for us to make a loan decision. We don't pull your credit until we know we are making a loan for you, and not without your permission. |
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