Miles Loss, Mortgage Broker- Hard Money Loans

Hard Money Loans

For the purpose of financing your investment properties there are two options- Hard Money & Soft Money.

SOFT MONEY- is simply money that is borrowed from banks and other lending institutions. This is the normal loan process where the loan is underwritten by an underwriter. There are rules and guidelines that are made by the lenders or by the groups that buy the loans from the lenders. This would include all loan types and verities.

HARD MONEY- is money from investors to fund your investment property. Hard Money is normally sort term. Hard Money is normally used when the property needs some repairs and rehab. With Hard Money you can finance the expense for repairs as a part of your loan. If you are able to locate a home with good equity you will be able to do the entire purchase and rehab with no money out of your pocket.

THE RULES- since the money is coming from private investors they can make their own rules, unlike soft money above where the rules can be more restrictive. For this reason you can obtain money and eventually additional money based upon your track record and performance with a particular Hard Money Lender.

AFTER REPAIR VALUE (ARV)- This is what the property would be worth after your rehab is competed and this value is normally determined by appraisers that work with your hard money lender. Normally Hard Money lenders will loan 65%-70% of the ARV. This is how it works… if you buy a home for $100,000 you can borrow $65,000, 65%, right? Wrong. Let’s say the ARV is $200,000 you would be able to borrow 65% of that amount or $130,000, now you have money to buy the house for $100,000 and pay for your rehab.

ESCROWS- This is money that is held by a 3^rd party, normally a Title Company, for a specific purpose. In the case of Hard Money Lending they would escrow your repair money and in some instances they would escrow your first couple of payments. This is done to ensure that the work on the property is actually completed. When you first apply for your Hard Money Loan for a specific property you would prepare a work sheet of what needs to be done and the cost of that work. This would be used to set up your escrow account.

DRAWS- The way the money for repairs is disbursed is by using draws. The Hard Money Lender would physically inspect the property to ensure the work was actually done and disburse the money accordingly. The money is not released all at once, rather in gradual portions as the work is completed. Each portion is a draw.

WHEN & WHY- There is a time a place to use Hard Money Loans. Normally for Soft Money to be used the property needs to have a roof, windows, doors, floor coverings. If the property does need some work this is called deferred maintenance. This would be noted by the appraiser when the appraisal is done. Traditionally if this number is over $2,000 you would not be able to receive a Soft Money Loan. The other reason investors use Hard Money Loans is so they do not need to use any of their money or to personally fund their project. As you can see a good portion of the properties an investor buys would be financed with a Hard Money Loan. This is due to the fact that most foreclosed properties are not well kept. However, there are always exceptions to this.

HOW TO- The process for doing a Hard Money Loan is very simple.

1^st- I would get you approved for a line of credit for the hard money lender for a particular amount. This would normally increase as you do business with the Hard Money Lender and prove your credit worthiness.

2^nd- Each project you want to do you would provide me with the contract and a draw sheet for work to be done.

GETTING STARTED:

Fill out an online application- link on Home Page. Then send me an email contact@milesloss.com advising me that the application is for hard money.
I would normally need to ask a few questions via phone or email- whichever is more convenient for you.
I would compile a short two page Hard Money application which I would email to you. You sign each page and fax back.
You would also fax me two forms of ID, one being a driver’s license.
I would get you approved for a specific dollar amount.
At some point before your first loan is funded a face to face meeting would be arranged to ensure you understand the entire draw process.
For each property you wish to finance you would provide me with a copy of a fully executed contract and the filled out draw sheet as described above.