How the Hard Money Loan Program Works
If you want a hard money loan in Las Vegas, Nevada on any type of real estate whether purchase or refinance, read these hard money basics about the program and then call us. We are the low price leader of real hard money lenders. We charge no junk fees, no prepayment penalties, and we deliver. You aren’t going to be left standing at the closing table with no funds. If we say you are getting the loan, then you get the loan.
Even though it is a “hard money loan”, which historically has been based on the “equity” in the property, recent state and federal laws mandate that we document that you can make the payment. To do that, we must collect from you the last two years of tax returns and a bank statement. If you are employed, you should also be prepared to provide your paycheck and W2.
We look at the documentation differently than a conventional lender does. Our ratios are not the same, we look at your credit differently, and we base the loans on “common sense”. We do not have a box that you must fit into. If there are mitigating circumstances on your loan, we listen to them. We don’t have a minimum credit score requirement. The credit scoring system is a mess and needs to be fixed. These days, most people have a foreclosure on their records, or a bankruptcy, or a short sale, or a late credit card.
There are some things that we don’t do – and they don’t fit into our box no matter what.
- no mobile homes, even if they are converted to real estate – ACTUALLY WE DO THESE NOW!
- no trashy properties – WELL, THEY MUST BE REALLY TRASHY FOR US TO TURN THEM DOWN
- no neighborhoods that have high crime statistics
- no past due child support payments – THAT’S NOT US, THAT’S FEDERAL. BESIDES, YOU SHOULD BE PAYING
- YOUR FAIR SHARE
- no violent borrowers
- no 2nds behind big 1sts
- There may be a few others that aren’t on our list, but those are pretty much the basics.
Here is the process:
These are the types of questions we will ask you:
- is it a refinance or purchase?
- what is the property address?
- what is your idea of the value of the property (how much you paid for it)?
- how much you are buying it for?
- how much is owed on it right now?
- how much money you have in the bank (if you are buying the property, you MUST have at least 40% of the purchase price, plus enough money for closing costs, plus a few months’ worth of payments, plus a little bit left over for emergencies. If you are doing a refinance, then you don’t need to have very much in the bank, but it helps that we see that you are not flat broke.
- how much money do you make per month?
- where do you work?
- what do you think your credit score is and why?
If those answers are satisfactory, we will give you the terms and conditions of your loan, based on the information you have given us. These terms and conditions rarely change, but once we receive your data, and see the property, and check the comps, they may change.
Some important things to know: on owner occupied loans we do not charge any prepayment penalties currently, but on investment properties we charge an “interest guarantee”, usually of at least 3 months and not usually greater than 12 months.
Each loan is different, and it depends on how long you want the money for. Additionally, owner occupied loans do not have a “default rate of interest” but investment properties do, and the “default rate is 24%”. The default rate kicks in at 20 days past due and stays there until you bring the payments current.
Also, we have a loan servicing company, and they collect your payments. You can pay by phone, by debit card, by e-check, etc. They will charge a fee to process your payment each month. This is called a monthly servicing fee. On large dollar loans, with multiple investors, this fee can go up to $500 per month, but it is usually under $30 per month for most loans.
After you agree to the terms and conditions of the loan, we will choose the investor who will most likely fund your loan, and we go over all of the information with him or her. If they have any special requirements, we will let you know, but most loans stick to the standard formula.
If you like the terms and conditions of the proposed loan, you will then need to fax/email us a copy of your most recent bank statements to 1-702-214-4703 proving that you have enough money in the bank to purchase the property. If you have the money somewhere else, please tell us how we can verify that. You can also start a chat with us, and attach the documents to the chat.
If we like the property and you, we will call you and ask you for SOME of the following items. We listen to your scenario first before we figure out what we are going to ask you to submit.
- tax returns
- most recent bank statements (maybe two months, depending on what we see)
- purchase agreement
- name and number of your realtor and the escrow company your name, address, phone number, email addresses, SSN, d.o.b., and marital status. We will put all this information into your loan application, and there will be a few other questions.
- then we send you your disclosures
- you sign them, and fax them back.
- we receive the preliminary title report and then we update your investor with the most recent information and finalize the terms of the loan.
- we send loan documents to you for your review – including the settlement statement that shows all of the costs of the loan.
- we set up a signing time for you to go to the title company and sign your documents. We will be available to answer any questions and make sure everything is correct and understandable by phone and you may also schedule a time to come and go over the documents with us BEFORE you go to escrow.
You can email or fax or hand deliver the documents. We prefer email or fax. We do not usually meet with you in person until 3/4 of the way through the process. The reason is because we are pushed for time on all of these loans, and we do not need to see you until we know for sure that we are doing the loan. However, one of our rules is that we must meet you and we must see the property before we close the loan. If you are long distance, we can use Skype to interview you.
Coupons for Making Payments
After that, you will make your payments to a third party loan servicing company who specializes in collecting payments from borrowers. They will deposit the money directly into the investor’s account. They will send you a statement of the amount of interest that you paid at the end of the year for your taxes. They will provide a verification of payment history if you decide to get a conventional loan. The service will cost you approximately $10 to $30 per month, depending on how many bills are being paid through the impound account i.e. taxes, insurance, HOA, SID/LIDs, etc. It is $2 extra per month for every bill that gets paid.
How to Make a Payment, and What About Late Payments?
You will receive coupons from the loan servicing company. You can have the payments taken out of your account automatically. Make sure the money gets there by the 5th day of the month, or you will incur a late charge. If you are more than 20 days late, your interest rate will increase by another 10-14%. This is called the ‘default rate’. The default rate stays in effect until you bring all of the payments current. If you are going to be late, CALL US and tell us why. If we do not know what is going on, we will file a “Notice of Default” very quickly, and then you must pay for that also.
Why Do We Ask For W2’s, Pay Stubs, Tax Returns, Etc.?
If this is a hard money loan, why do you need all of that paperwork? Well, the federal government and our state government outlawed making loans on properties without verifying that the borrower had the ability to make the monthly payment. Hence, we need something in our files that proves that you make enough money to pay the monthly payments, and to pay the loan back at the end of the term.
The Good News Is: We Don’t Have Strict Rules
like Fannie Mae, FHA, and Freddie Mac do.
Our Investors think outside the box, so
- If your mother lives with you and she gives you her social security check to help pay the mortgage, we’ll count it.
- If your wife, who isn’t going to be on the loan, brings in income to the family, we’ll count it.
- If you are a real estate investor, and you live off the income from your rental properties, that’s okay.
- If you are self-employed, and you write everything off, we’ll analyze it, and it will probably be okay.
- If you changed occupations, because you are totally qualified to do that, and you haven’t been in the job for two or more years, that’s okay. We’ve changed occupations too, and we still made our house payment on time.
So bottom line is, does it make common sense to do the loan? Tell us your explanations of why you have unpaid medical bills (because an uninsured motorist t-boned you and your insurance company conveniently forgot to pay a couple of bills, and forgot to tell you about it too), why you lost your last house (after losing your job and the bank wouldn’t work with you) and so on.
What Isn’t Okay: Judgments, Liens, Tax Liens, and Child Support
It’s not okay if you don’t file your federal tax returns. We must and so do you. The tax returns DO NOT have to show a bunch of money. We are realists. If you don’t pay your child support, then we can’t help you buy a house.
If you have a bunch of judgments and liens it means you’ve made someone mad enough to go to court to get paid, and we can’t give you a loan, UNLESS YOU AGREE TO PAY THEM OFF AT CLOSING. If there is a logical reason for the judgments, then tell us and we’ll decide.
So that’s it in a nutshell. We do what we say we are going to do, we tell you quickly, and when you get to the closing table, everything will be the same as what you expected. Now that is priceless.