Hard money loans are also known as private money loans. Most investors prefer the favorable terms and ultra-low rates of conventional financing, but there are certain situations when owner occupied hard money loans can help you achieve your dreams.
If you cannot qualify for a conventional loan and you have a down payment of 30-40%, you may have a short-term solution, a hard money loan to assist you in acquiring a new home. Keep in mind that owner occupied hard money loans are usually easier to obtain than conventional loans. Most loans were equity based until 2008. At the time, if your loan to value (LTV) was 60% or less, a commitment would be issued without the lender considering if the borrower could repay the loan.
In today’s environment, the lender must confirm the ability of the borrower to repay the loan. This is tied to Dodd Frank law and a host of other regulations. On the other hand, owner occupied hard money loans can usually be obtained with a 30% down payment. The lenders may cut back the LTV to 50-60% for less desirable or rural areas. Keep in mind that a definitive exit strategy is needed by borrowers if they use hard money lenders.
If you have had a foreclosure or a short sale in the last 2-3 years, a hard money loan may be your answer to needed capital. Conventional loans require that you allow 3 years to pass before applying for a new conventional loan. If you are considering using a hard money lender you need to have an exit strategy to exit from the hard money loan. One exit strategy is paying off the hard money loan once your first home sells.
There are very strict laws when a borrower is applying for a conventional loan. The lender in a conventional loan needs to know where the funds are coming from and how long the funds have been in the accounts. A hard money lender is more concerned with the equity position in the property and the borrower’s ability to repay rather than where the down payment funds come from. With a hard money lender, you can use funds from a business account or a family member.
Some hard money lenders require the following when obtaining owner occupied hard money loans:
· A signed Loan application
· Recent credit report
· A signed borrower authorization
· Credit authorization
· Consumer loan disclosures
· A purchase agreement for the property you wish to purchase
· Title report
· Evidence of escrow
· Proof of funds 30-40%
· Pay Stub
· Down Payment proof of funds
A “blanket loan” can be issued if the buyer has substantial equity in the selling property which is listed for sale with the new property. The properties will be “cross collateralized” which includes utilizing the vacating property and the new purchase. In real estate circles, this type of loan is considered a cross-collateralized owner-occupied bridge loan.
At Level 4 Funding, we make it a point to help you through the process of obtaining hard money loans without the need for mounds of paperwork. Three simple steps can set you up for success: a purchase contract, loan application and a written approval. We do not require tax returns, pay stubs or credit checks and there are no upfront or junk fees. Call us today for a no-obligation quote.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.