Frequently Asked Questions (FAQ)
Find answers to commonly asked questions about Hard Money loans, lending, and more!
Well, what is a Hard Money loan?
A hard money loan is a type of short-term, non-conforming loan secured by real estate. It is primarily used in real estate transactions and is typically issued by private investors or companies rather than traditional banks. Hard Money is also known as Private Money, as it comes direct from individuals.
Here are some key characteristics of hard money loans:
1. Collateral-Based: The loan is primarily secured by the value and equity of the property.
2. Short-Term: These loans usually have terms ranging from a few months to a few years.
3. Higher Interest Rates: Due to the higher risk involved, hard money loans often come with higher interest rates compared to conventional/bank loans.
4. Quick Approval and Funding: Hard money loans can be approved and funded much more quickly than traditional loans, making them attractive for individuals who need fast financing, such as realtors with homebuyers needing a fast close, real estate investors in need of fast financing, mortgage brokers who have borrowers who don’t quality for their Underwriting, etc.
5. Flexible Terms: Hard Money or Private Money loans are more forgiving and have more flexibility in their terms so their terms can be tailored to the borrower’s needs.
6. Uses: Commonly used for real estate investments, such as fix-and-flip projects, fast cash out for needed business capital, land loans, self employed individuals with difficult to prove income, and situations where the borrower or buyer needs to act quickly to seize an opportunity.
Hard money/Private money loans are generally considered a short-term funding solution due to their cost, but they can be crucial in scenarios where traditional financing is not available or suitable.
Are you a Broker?
Yes, we are licensed as Real Estate Brokers and Mortgage Lenders, however, we do not broker out loans to other Brokers to fund. We are considered a direct lender. We have a large roster of experienced private investors, who will provide financing in the form of a home mortgage, based off your real estate equity as collateral.
What Property Types Qualify?
We offer Hard Money loans on most property types, including single family, multiple unit properties, some land, and smaller commercial properties. Our Lenders typically consider loan sizes from $100,000 up to $2,000,000 throughout California. We do not offer ARV (After Repair Value) or construction loans and only lend on a property’s existing as is value.
Do Private Investors/Hard Money Lenders count on foreclosure to acquire my property?
No, quite the contrary. The foreclosure process is time-consuming, costly and can come with problems. Private Investors, also known as Private Money Lenders, are simply trying to provide an alternative financing service to borrowers who otherwise couldn’t get the financing they are in need of. They are looking for a good return on their investment, but they need to protect themselves. Pacific Direct Mortgage works to ensure each private lender is accredited per State regulations, and we pride ourselves on pre-screening borrowers for hard money qualifications, and that they have an exit strategy to pay off the private money loan prior to any default occurring to move the borrower into a better position.
Do you offer owner-occupied financing?
Yes, we do! Regulations have become more restrictive in recent years, but while many Hard Money Brokers have abandoned these primary residence and consumer purpose type loans, we continue to offer them. We pride ourselves in adhering to the lending regulations that protect our borrowers and investors alike, and we keep abreast of all the latest rules, regulations, and their revisions.
We work with many Brokers and conventional Lenders who need a quick solution or alternative financing solution for one of their clients. We step in to partner with them, bringing a successful and happy close for their Buyer and Borrowers’ real estate financing needs. It’s really a win-win for all!
What are the rates paid for a hard money loan?
Generally, due to the higher risks with a private money loan borrower (poor credit, rough property condition, high debt to income ratios, difficult to prove income, etc.) Hard Money rates are higher than conventional & traditional lending/bank rates. Loan to value, property condition, borrower qualifications can all affect a rate for a Hard Money loan.
Generally you will find hard money rates anywhere from 8%/9% up to 14%/15%. There are a number of factors that will affect the rate including: property condition and location, loan-to-value, borrower qualifications, lien position (1st or 2nd mortgage), etc. Contact us today for a free loan estimate.
How do I get started or find our more about your Private Money loan programs?
You can complete the contact form at the end of any one of our website pages and we’ll get back to you. Or you can give us a call today at 707-708-0797 to quickly get any questions answered and receive a loan quote, with no obligation or cost to you. Our friendly and knowledgeable staff will be happy to answer any questions you may have.
Are there any upfront fees for these loans?
No. There are no application or upfront fees for our Hard Money loans – for refinances or purchases. In fact, you should never have to pay an upfront fee for a home loan; that is a red flag to possible fraud.
Working with Brokers and Licensing Requirements: Do You Have to Be Licensed?
Working With Brokers and Licensed Professionals
Yes. We work with hundreds of brokers and welcome mortgage brokers, real estate agents, loan originators, and other licensed professionals who have buyers or borrowers in need of alternative, flexible, forgiving, and fast home loan solutions. When brokering a loan with Pacific Direct Mortgage, licensed professionals may still earn their commission. A non licensed DRE individual may earn a referral fee on business purpose loans only, as permitted by law.
Licensing Requirements for Hard Money and Private Money
Lending Not all lending requires licensing. However, we believe that to receive the best possible service and have access to all available loan options, working with a fully licensed lender is important. Pacific Direct Mortgage is fully licensed as Real Estate Agents and Mortgage Loan Originators and provides hard money loans in the State of California. Our licensing also extends to a number of other states, which has allowed us to provide financing for investment properties outside of California.
We are licensed through the California Department of Real Estate and the Nationwide Multistate Licensing System. To maintain our licenses, we complete required continuing education and regulatory training at both the state and federal levels. Hard money loans are regulated by state and federal governments, and when borrowing through Pacific Direct Mortgage, borrowers can be confident they are working with a family owned company that prioritizes honesty, integrity, and compliance.
How long does it take to close a loan?
A distinct advantage of our hard money loan programs is the ability to facilitate a fast close for a home purchase or a fast funding for a refinance or cash out. We regularly average 14 days from start to finish, with many loans financed in less than 1 week!
Is poor credit score an issue?
Credit score is not the determining factor when applying for a Hard Money loan. The primary qualification is equity in the real estate, either through existing equity on a refinance or a sizable down payment on a purchase. Private Investors are most concerned with property equity and may finance loans for borrowers with little or no credit, including those with prior foreclosures, short sales, or bankruptcies.
What does a hard money loan cost?
There are no set criteria for Hard money fees. Our required fees cover the cost of processing the necessary documents to satisfy Federal and State requirements. We also charge points for our efforts & time to help push the loan through to a done for Brokers & their borrowers. These fees can vary from Company to Company. When you call or email us, as part of your quote you will be notified of the fees & costs to successfully get your loan financed.
What information is needed to get preapproved or qualified for a hard money loan?
Hard money qualifications are much less stringent than traditional bank financing and require limited documentation. The main qualification is sufficient equity or a sizable down payment. Typical items requested include a completed loan application, a current paystub or recent bank statements, a written purpose letter for the refinance or purchase, and property insurance. After you receive a quote and confirm you would like to proceed, we provide a detailed checklist to submit the loan to our Investors or Lenders for review, final approval, and preparation of loan documents for signing.
What Loan-To-Value is needed to qualify for a Hard Money loan?
Loan To Value (LTV) is determined by dividing the loan amount by the property value or purchase price and is the primary factor when applying for a Hard Money loan. For purchases, our Lenders will consider up to 75% LTV. For refinances, Lenders generally consider up to 65%, with higher LTVs reviewed on a case by case basis. For second position loans, Lenders typically do not exceed 60% combined loan to value (CLTV). Land loans are generally capped at 45% to 50% LTV, and commercial properties are typically considered at 60% LTV or lower.
How are Trust Deeds more secure with you?
Our business purpose loan docs are done with DossDocs, one of the strongest Private Money Attorneys and brand in the business.
Frequently Asked Questions from Investors (FAQ)
Are trust deeds a secure investment?
Trust deeds are generally considered to be lower risk than unsecured loans. This is because the investment is secured by a physical asset, the borrower’s property, which means that if the borrower doesn’t repay the loan, the investor has assets to claim. Trust Deed Investment is not without risk though, much like any form of investment.
Are there predictable returns?
Trust deeds come with a fixed interest rate for a specific amount of time which provides for a more predictable cash flow.
Does investing in trust deeds help diversification?
Yes, by adding Trust Deeds to your portfolio, you are incorporating a different asset class that might perform differently than stocks or bonds.
Do trust deeds offer better returns?
Because Trust Deeds are secured by real estate and involve a relatively short-term investment, they can offer higher returns compared to savings accounts or CDs.
Are trust deeds a short-term investment?
Most trust deeds are short-term loans, which can allow investors to realize returns relatively quickly compared to long-term investments like owning real estate or long term held stocks. Average Trust Deed investment lengths are between 1 to 3 years.
What is the market volitivity of trust deeds?
Unlike equities, the performance of trust deeds is less influenced by stock market volatility, providing some insulation against market fluctuations.
Is this a good way to invest in real estate?
For those interested in real estate but not looking to directly buy or manage properties, investing in trust deeds offers passive income, through indirect exposure to the real estate market.
Is there potential for higher loan-to-value ratios with trust deeds?
Our trust deeds come with 75% loan-to-value ratio or lower!
Is utilizing a professional mortgage Broker important?
Yes. There are a number of regulations that must be complied with when lending in Trust Deeds. If you do not use a Mortgage Broker like Pacific Direct Mortgage you risk violating Usuary Regulations that could land you in hot water. A Mortgage Broker will also provide the Borrower and yourself with required disclosures, as well as help navigate the complexity of existing and new regulations.
Start Your Financing Conversation Today
Contact us now to discuss flexible private money lending solutions and real estate financing opportunities!