By Noah Brocious – President/RI/Mortgage Loan Originator – Until recently, hard money was likely the least used and most misunderstood lending platform in the mortgage industry. The bank deregulations made it easy for borrowers to find cheap money easily, without having to come up with a huge down payment or provide any proof they could in fact afford to repay the loan.
Now that banks have tightened their restrictions, especially for the home investor, more and more real estate entrepreneurs are turning to private lenders for hard money loans. As hard money lenders in Arizona, we are often asked if we function like conventional banks. We do not.
One of the most common questions is “are we a direct lender?”
That’s always an excellent question, and whether you choose to work with Capital Fund 1 or not, you should ask this to every hard money lender you shop in Phoenix. This question is very important because many private hard money institutions in Arizona advertise themselves as being direct lenders, when in fact they are simply co-brokers.
They do not have legitimate access to capital, creating a chain of brokers that will undoubtedly come with a larger amount of fees. A true hard money provider has a source of direct funds, and no middleman to handle your loan.
That’s how Capital Fund I works. We service and underwrite all of our own loans, providing funds for your investment purchase on behalf of our investors. You will never have to worry about excess fees or dealing with the middleman in our business.
Next time you apply for a private mortgage loan, ask if the broker is a direct lender or if he is just the co-broker. Doing so will save you some time and money in the long run.
The Capital Fund 1 Advantage
One of the many advantages of borrowing from a Private Hard Money Lender, like Capital Fund I, is that we perform all underwriting, documentation, and signings in-house, therefore we can fund loans in 24 hours and even quicker in some instances. Trustee Sale purchases are under the biggest time crunch for a loan, which is why many turns to hard money lenders.
The process for a trustee sale hard money loan with Capital Fund 1 is as follows:
- Borrower wins the bid at trustee sale auction
- The borrower provides CFI with the property address and winning bid price via phone, email, or text message
- CFI underwrites property to determine the loan amount
- Typically, within an hour of receiving property info, CFI responds to Borrower with a proposed loan amount
- Assuming borrower is agreeable, an appointment is set for Borrower to come to CFI office and sign loan documents which CFI will then prepare
- CFI Orders a full title commitment for the property which is received before the loan is funded.
- Document signing occurs later that day or the next morning
- After signing CFI takes the borrower’s Cashier’s Check as well as the Cashiers’ Check in the amount of the loan to the trustee and pays for the property.
The process for a loan on a property that is being purchased through escrow is very similar.
What is Hard Money or Private Lending?
Hard Money lending, or Private lending, is a type of asset-based lending in which an individual or group of individuals lends money to a Borrower and those funds are secured by the collateral in the form of a Deed of Trust. These loans typically do not require a credit check or the need to provide financials to the lender. The collateral is the only thing that is underwritten. Due to this and the private nature of the funds, these types of loans are typically able to be funded in very short time frames.
The main differences between Hard Money and Conventional or Institutional Lending are:
- Higher Interest Rate
- Shorter Loan Term
- Larger Down Payment Requirements
- Quicker Loan Funding
Due to the fact that Hard Money lenders don’t underwrite the Borrower their comfort level with the loan comes from equity (or “skin”) that the Borrower puts in the deal. If a borrower defaults on their payments a Hard Money lender goes through the same process as a conventional lender and takes the property back – in Arizona, this happens through the trustee sale process.
With this in mind, the Hard Money lender wants to keep their loan amount to a number at which the property would most likely sell if it was taken to trustee sale.
Private lending has emerged as one of the safest and most reliable forms of funding for investment home purchases. As a trustee sales or foreclosure investor, have you discovered the value of a hard money loan?
Hard money works to your advantage for many reasons and is a far greater option than a conventional bank when it comes to funding a trustee sale. As a trustee buyer, you don’t have a lot of time to make a decision and you definitely can’t wait around for the conventional bank to fund your loan. That takes at least 30 days or more, and you need to act fast.
You may just opt to use cash on hand when you go to the trustee auctions. But how many homes does that get you? If you are buying with cash, you might walk away with one or two purchases a month.
With hard money loans, you are typically required to put only 20 to 30% down on the purchase. This allows you to triple the number of purchases you make per month if you can find the right deals to turn around quickly.
Contact Capital Fund 1 Today!
With all this buying power, you can become a master rehab and resell investor in no time flat. Call Capital Fund I today and find out how to fund your 24-hour private loan.