If you are looking for a hard money loan in Los Angeles, go through this article once to know all about hard money loans and its uses, application procedures, required documents and everything.
Hard money loans have become increasingly popular among the borrowers, especially in the Los Angeles of California. So there is a lot of competition among lenders who lend money, especially for the real estate sector. Let us have a look at all the information related to hard money loans in Los Angeles.
What is a hard money loan?
A hard money loan refers to any private loan that is secured by the value of the borrower's assets. It is commonly used in the real estate sector. In the case of a real estate hard money loan, the borrower's property that is being purchased or any real estate asset of the borrower serves as collateral. Unlike institutional lenders such as banks or any financial institution, hard money loans are funded by any individual or non-traditional lender.
How Does a Hard Money Loan Work?
A hard money loan is the quickest way to get funds from a private lender by using real estate assets as collateral. Unlike the traditional mortgage loan, it focuses on the current value of your property or assets rather than on your credit score. If anything wrong happens or the borrower is unable to pay the debt, lenders can get their money back by selling the property or assets. The interest rate on hard money loans is much higher as compared to other conventional or commercial banks. Loan terms and interest vary from one lender to another. Generally, the loan term is short and of 12 months to 2 years and the interest rate ranges from 7-14%.
Borrowing Process of a Hard Money Loan in Los Angeles -
Generally, the process begins with finding a hard money lender or the institution specialising in this type of transaction. Quick internet searches can help you to find the list of all reputed hard money lenders in your area. Reach out to several money lenders, discuss your needs and requirements and try to develop a desirable relationship so that you can easily get the loan to fund your project. While considering the loan approval, hard money lenders in Los Angeles are concerned with the current value of your real estate asset which you are using as collateral. They also verify borrowers' documents and records such as poor credit scores, short sales, bankruptcies, foreclosures, and loan modifications. Hard money lenders in Los Angeles generally require a down payment of 25 to 30%.
Required documents - In addition to your personal information, there are some documents a lender may ask when you apply for the hard money loan, these include:
● Documents regarding the current value of your real estate assets
● Documentation on the estimated cost of repair, construction or rehab
● Proof of insurance
● Documents regarding the title of the property
Once your documents are verified by the private money lender and you are approved for a private loan, you will receive funds within two weeks. This quick and hassle-free procedure of getting funds attracts most of the borrowers for hard money loans in Los Angeles.
Common uses of hard money loan in Los Angeles - Some of the common uses of hard money loans in the real estate sector in Los Angeles include:
● construction
● land purchase/development projects
● fix and flip projects
In addition to this, private funds can also be used to purchase different kinds of properties. These properties can be classified generally into two categories:
Residential properties:
● Fix and flip properties: remodels, renovations, buy and holds
● Single-family, duplexes, triplexes, and quadruplex homes
● Apartments
● Condominiums
Commercial properties:
● Multi-family units: planned communities and complexes
● Office spaces: business, executive suites, medical offices
● Industrial zones: distribution centers, manufacturing factories, warehouses
● Hospitality centers: hotels, motels, restaurants
The borrowing limit on commercial property tends to be higher as compared to residential property. This is because the cost of developing or renovating a commercial property is higher than the cost of a single-family home or other residential property. Most of the lenders agree on the terms that the purchased property should not be occupied by the owner. The property must be resale.
You may take a step back when you hear of a higher rate of interest but you will get the fund quickly by approaching a hard money loan in Los Angeles. Conventional banks offer a loan on a lower interest but take a longer time to approve. Borrowers have to wait for months to get the fund after the approval of the loan application. On the other hand, hard money loans can be closed within 7 to 14 days. Your credit score does not matter that much but the value of your current property matters a lot for getting a hard money loan in Los Angeles. You can approach the hard money loans in Los Angeles if other traditional banks have denied you funding because of your low credit score or due to some other reasons.