|
More difficult to find than today's mainstream lenders, a hard money lender can provide much needed funds - and for some property deals,
they may be your only loan choice.
The way hard money lenders work is that they can loan you enough
money to buy foreclosure real estate and to cover repair costs; but there is a condition - they
will typically loan only 65% of a home's value.
The value of the home is based upon its fully repaired condition. Also, a typical hard money loan will include
a balloon payment, usually due after 1 or 2 years, 12 to 20 percent interest rates and a first mortgage.
Hard Money Financing Process
You locate a property and go under contract for $45,000. This means that you sign a contract with the owner to
purchase the property from him for an agreed upon amount of money, in this case,
$45,000. After inspecting the property, you determine it needs about $15,000 worth of
repairs. Upon studying the market value of other houses in the area, you conclude the
fully repaired house is worth around $100,000. Your next step is to do the appraisal. Appraisals, including drive-by appraisals,
will cost about $250.
The next thing a hard money lender will ask for is clear title. Clear title means that the title
of the property has been professionally examined by a title company and found to be free
of liens and encumbrances and is legally owned by the person you are buying the
property from. This is something your attorney will provide, so you must also locate a real estate attorney.
Ask the lender who she wants the bank endorsement made out to. Call your
attorney and give him the name of the bank endorsement, as this information must be specified on the title policy.
Make sure you tell your attorney to order title through a title company that is very fast, as you will come to see that speed is of the essence.
At this point, the hard money lender (bank) will ask you for hazard insurance. You
can purchase this through a local insurance agent. It will cost between $500 and $1,000
for a one year premium. Keep in mind that your insurance agent will ask what bank to
put in the "additionally insured" section of the policy. Enter the same bank as the title policy. This is a bank requirement.
Once you have the appraisal, title policy, and hazard insurance, it’s time to get
rolling. A good hard money lender is able to lend you the money and schedule a closing
just a few days after all these items are in. At closing, you will sign all the necessary
paperwork, including a mortgage, mortgage note and the HUD-1 or RESPA (these latter
forms itemize all the fees associated with closing a mortgage and transfer of ownership).
At this point you will receive your first draw of money to start making repairs on the
property you have just purchased.
Hard Money Lender Loans : Sources
Hard Money Lenders - Steve Maletos has put together a
step-by-step real estate course that includes nationwide sources for hard money lenders. It empowers home buyers with the knowledge to save thousands on their
next home or property purchase. Join the many who have saved (and made) money buying real estate foreclosure properties using hard money loans.
For complete information on how to purchase Real Estate Foreclosure Properties, purchase the #1 eBook Course,
"Fast Cash in Real Estate Foreclosures."
Affordable, this downloadable ebook is packed with facts on everything you need to know
for creating profit from real estate property with a hard money lender loan.
A
R
T
I
C
L
E
S
|
