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Have you ever heard of Hard Money Lenders in California? What does this type of lender do and when in life would a person need to take advantage of this type of lender? These are the questions we are going to answer, so keep reading to find out whether a hard money lender can be the solution to your unique mortgage situation.

What Is a Hard Money Lender?

A lender is considered a hard money lender when it lends money outside of a traditional bank or credit union. Hard money lenders are known to lend money to individuals as well as businesses.

In some instances, hard money loans are referred to as bridge loans. Bridge loans are short-term loans that are many times used by investors, particularly those in the real estate industry. The funds accessed through bridge loans are generally used by real estate investors to flip homes and renovate properties. The funds themselves are typically provided by investment groups or private lenders.

A person or entity who wants to access funds through a hard money lender will need to provide equity in order to qualify. This is because most hard money lenders base an entity’s qualification status on equity rather than a credit score. In fact, because of this, you may have heard of hard money loans being referred to as equity-based loans. With hard money loans, you won’t have to fill out a bunch of paperwork and provide all types of documentation to prove you have good credit. Instead, you simply put down a large down payment to offset the lender’s risk in loaning you money.

If, however, you do want to use your credit to secure funds through a hard money lender, then you should make this known when you start applying for funds. Let the lender know you are willing to provide documentation of good credit to try and lower your interest rate on the borrowed funds. Some hard money lenders will provide a reduced interest rate for those with really good credit. If you can’t find a hard money lender willing to provide a reduced rate for good credit, then you may find a traditional lending route to be more appealing. A conventional lender will without a doubt almost always be able to provide the lowest interest rate possible on a mortgage.

Why Should You Get a Hard Money Loan?

If you don’t qualify for a conventional mortgage loan through a bank or credit union, then a hard money loan may be the only way for you to get a mortgage. On the upside, a hard money loan gives you access to funds much faster than a conventional loan. Hard money loans are usually processed and available within only a few weeks or days.  A conventional mortgage can take months to get approved for and access to funds.

The following is a list of borrowers who tend to access funds through hard money loans:

Property Flippers

Do you buy homes, renovate them, and then flip them for a profit? Or is this something you think you might be interested in? Either way, you will need funds to perform property purchases and renovations. Unfortunately, a lot of conventional lenders won’t provide funds for flipping properties. However, hard money lenders especially like lending to property flippers because they know they will get their money back as soon as the property is flipped (as long as a profit is made). It’s a win-win for everyone. Property flippers get fast access to cash to perform renovations while the lenders know the property will be flipped as fast as possible, meaning they get their funds back fast too.

Can’t Qualify for Traditional Loan

There are numerous reasons as to why you may not qualify for a traditional mortgage loan. Take for example you are going through a divorce. Your credit score is good but the divorce is holding up things when it comes to accessing funds through a traditional loan. With a hard money lender, you don’t have to fret about the divorce. Instead, you can explain your situation and mention the equity you have to work with. This will help the hard money lender understand how much you want to borrow and whether you have sufficient equity to back up the loan.

Homeowners Facing Foreclosure With Lots of Equity

If you’re facing foreclosure but have lots of equity and want to keep your home, then you should definitely speak with a hard money lender. However, keep in mind that the only way a hard money lender will want to work with you is if they can:

Final Thoughts

Are you considering applying for a hard money loan? We hope the information we provided above helps you have a better understanding of how these loans work and who most commonly takes advantage of them. Most hard money lenders provide flexible repayment terms, but most importantly, they give you fast access to cash, making it simple to get your hands on the money you need when you need it. Just remember, you don’t need a top-notch credit score to get funds through a hard money loan. Instead, you simply need equity, or in some instances, some form of substantial collateral. These loans are meant to serve as a short-term form of funding, so don’t approach or use them as a long-term form of getting your hands of cash. When used correctly, California Hard Money Lenders can help you make and save money.

Hard Money Lenders California

Many people have likely seen or at least heard of reality television shows that follow the journey of real estate investors who purchase a property that requires some tender loving care and carefully transform it into something they can sell for a significant amount more than what they spent on it. This is also called flipping a property.

California Home Builder Reviewing Construction Plans with Clients

One of the latest trends in real estate investing is flipping houses. More people are buying homes that are selling for a low price to make renovations and changes that can boost the value of the home, quickly turning the home around for a profit. Unfortunately, it is possible to do house flipping incorrectly, which can end up costing you more money than you make.

Hard Money Lenders California

Hard money loans offer a range of benefits for businesses and investors, including fewer limitations, better negotiation power, flexibility, faster approval time and more. However, not all hard money lenders in California are the same, and some will offer you a greater advantage than others. For this reason, it is important to compare your options carefully before selecting any lender. Below is some information to help you understand what makes a good hard money lender, as well as how to choose the right lender for your specific needs.

House on Packs of Banknotes

California real estate offers plenty of opportunity for savvy investors.  According to Zillow, a real estate website, home values have jumped by 6.9 percent over the course of the past year. This means that anyone looking to make money with real estate in California needs the right assets in order to move forward with the deal.

This is where hard money funding for California real estate investment comes into play. Hard money loans have become an excellent alternative to traditional financing for home buyers, especially those who are interested in flipping homes.

There are a number of benefits that hard money funding has over traditional financing. Gaining a working understanding of hard money and how it works in the California housing market will be helpful in forming a real estate investment strategy. You’ll also need to know some of the downfalls of hard money lending, such as higher interest rates and shorter terms, combined with higher down payments. It’s up to you to make sure the benefits outweigh the drawbacks of hard money funding.

An Intro to Hard Money Lending in California

Hard money funding refers to any type of funding that comes through private individuals or organizations. Typically, in California, hard money lenders are a group of investors or private entities that provide capital for those interested in buying real estate. For example, we offer hard money funding for borrowers interested in fixing and flipping properties.

A hard money loan is generally secured by the real estate itself. When applying for hard money financing, your credit score certainly comes into play, but so does the condition and attributes of the property in question. When it comes to a fix and flip property, the lender is usually equally as concerned with the after-repair value as it is with the credit score of the borrower.

As an overall rule, a hard money lender in California will fund approximately 80 percent of the property, leaving you with the responsibility of funding the remaining 20 percent from another source of financing.

You’ll also need to know that California hard money lenders generally only operate within a specific geographic region. This means that the interest rates that you’ll have for a hard money loan will be different based on the location of the desired property.

The interest rates are typically higher for a hard money loan than a traditional bank loan. The main advantage of a hard money loan is the speed at which the funding can be provided, allowing you to swoop in on an ideal property. A hard money loan can be received in as little as a week, which can be compared to the several weeks or several months of a traditional loan.

The Top California Hard Money Lending Markets

As we discussed above, different hard money lenders operate in different regions. Below are the top regions in California for hard money lenders. Gaining an understanding of these markets will help you make your decision about which market you’d like to pursue your hard money loan within.

1. Sacramento

Sacramento is one of the most promising real estate sectors thanks to a bustling economy and reasonably priced homes. According to Zillow, home prices have grown by 11.3 percent in the past year.

While you won’t find a lot of competition for hard money loans in Sacramento, there are still plenty of hard money funding option available in this market.

2. Los Angeles

With more than a dozen or more hard money lenders in Los Angeles, there are plenty of options for people seeking a hard money loan. Interests rates tend to fall between 7 and 11 percent for hard money loans in Los Angeles.

The median sale price of a home in L.A. has grown by 5.6 percent over the course of the past year, meaning there’s plenty of room to make money by flipping houses in L.A.

3. Orange County

Orange County has plenty of inventory available, and there’s competition among hard money lenders to finance home purchases. Loan rates in Orange County often fall between 7 and 10 percent, which is much lower than the California average.

Additionally, Orange County homes saw a 5.7 percent increase in the median sales price between 2016 and 2017. It’s a growing area with plenty of opportunity.

4. San Diego

San Diego’s housing market is growing by leaps and bounds, with the average home value surpassing $555,000. With a median list price of $625,000, home sales have seen an increase of 6.8%. There are several hard money lenders that operate in this area, creating healthy competition for buyers.

5. San Francisco

Much like Orange County, there is competition among hard money lenders to finance home purchases in San Francisco. This results in interest rates being much lower than the average, falling around 7 to 9 percent. Your individual interest rate will depend on the property’s location, your credit and the profitability of the property.

The median home value in San Francisco is $1.14 million. During the year of 2016, the average profit per flip was an astonishing $140,000.

Weigh Your Options Carefully

Take time to consider your options carefully before pursuing a hard money loan or a traditional loan. Keep in mind the risks and rewards of each type of loan, as well as how important speed is in your situation. If you need funding right away to secure your ideal property, hard money funding in California may be exactly what you need.

Loan Contract Being Signed Stamped and Approved

If you’ve ever closed a traditional loan, you know how long it can take. However, expect a hard money loan to take even longer and to have a lot more involved in the closing process.  You can expect your hard money lender to help you through this process and give you a checklist of required documents and items required to close the hard money loan.

Hard money loans have a lot of people involved in closing a hard money loan and we will take a closer look at each one and the job they need to do. Read more