Tag Archive | Los Angeles California

Los Angeles Hard Money Lenders: More Appealing Now Than Ever

download (79)News shows that Los Angeles is going through a crippling housing situation. Demand for houses is growing. Los Angeles Realty News shows that the problem is that prices are spinning out of control making houses beyond the reach of those who most need them. The crisis has approached heights such that some activists are discussing seeking government intervention.

At one time, decades ago, people would approach banks for loans and the banks were more forthcoming. In fact they were too forthcoming which is why we had the Depression. Banks learned from that and subsequently only proffered loans once they closely reviewed credit history and worthiness. Today, banks and conventional lending institutions have put a harrowing folio of practices in motion which is why it takes so long to emerge with a mortgage (at least 60 days) and which is why so many potential borrowers are refused.

Those Who are refused seek alternatives

Hard money lenders

One of the most popular alternatives has been hard money – otherwise known as personal/direct/or bridge – lenders. Los Angeles has them too. If you look at the directories of PrivateLenderLinks or BiggerPockets,for instance, you will see 100-200 listings on each. Investors have few choices. There are the conventional loans and then there are the unconventional, but even these may be difficult and costly to land. One of the most appealing lenders in the unconventional loan category is the direct money loan lender who funds from his or her own pocket and considers the value of the collateral rather than the reputation of the borrower. Many find direct money lenders enchanting. They ask for little documentation and supply the loan in short order. Think of 2-3 days turnover!

On the other hand, all of this comes at a catch.

Disadvantages.

Hard money lenders intimidate potential investors in two ways:

1. Huge payments – Lenders fund from own pockets. They take a risk. To offset that risk, personal money lenders tend to ask for double the interest rate of the traditional mortgage loan. They also ask for a hefty prepayment. Few borrowers are able to oblige and when they fail, their property falls into the lender’s lap.

2. Low loan to value ratio – Properties have their equivalent in money.So, for instance,if your property is worth $80000 you would get $1000. Hard money lenders are notorious for paying glaringly low percentages that tend to hover around 50-60% of the collateral value. This also dissuaded borrowers.

Events have changed.

A few days ago, AlternativeLendingMagazine.com,the largest source for direct money loans and direct money lender programs in California, announced that hard money lenders in Los Angeles have expanded their LTVs from the usual 65% to 75% of the appraised value to more attractive rates. A cursory look at the latest reports from online LA lending agencies show that one or two individuals or organizations even offer LTVs at 100% of the appraised value.This is terrific news.

Alternative Lending Magazine compiled its research through the use of accurate, real-time, internet-based data collected from housing funding sales trends and lender behaviors such as recorded deeds and final closing statements. It analyzed more than 262 direct lenders. The website concluded that,given the situation in California in general and in Los Angeles in particular, these proceedings point to an optimistic future for hard money lenders in Los Angeles.

In short…

The high rate of interest remains one intimidating factors. But you can whittle down these rates with research, shopping around, and negotiation. Los Angeles needs its unconventional lenders. The market is rocketing and most investors need loans to profit. For those who are unable to land loans from traditional sources, direct money lenders are one interesting solution. Recent reports show that their mainstream popularity grows as rates push down and LTV floats up. In fact, hard money loans seems to be the best option of the future.

Yanni Raz is a hard money lender and trust deed investing specialist from Los Angeles California. Yanni write related blogs to educate potential real estate investors. “Before investing your money in any deal, read my articles.”

The Pluses and Minuses of Hard Money Loans

download (78)Hard money loans are an alternative form of getting money that many people are unaware of. When you need a loan in a hurry and are shunned by your bank or credit union because of your low credit or for other reasons, hard money lenders may lend you the required sum for as long as 10 years (or longer depending on circumstances). They look at your assets not your credit; therefore hard money lenders may be an alternative to consider. Here are some pluses and minuses of hard money loans

Pluses of Hard Money Loans

1. Rapid Process – Banks take 60 days at least to consummate the process. The typical hard money lender will hand you the loan within 1-2 days. Local lenders who know you may even give you the funds that same day. This works out particularly well for you if you need the money for some fast purchases, for emergency need, or for other situations such as when you want to move on with construction in order to sell your property. It also helps you impress the buyer when you want to jump in front of a bidding queue to land a certain property.

2. Less paperwork – Banks and traditional lending institutions tend to haul you through a grueling underwriting process that involves signing lengthy and complex forms and then waiting at least a month to see if you’ve been approved. Hard money lenders waive that. Each has his, or her, own system, and each deals with borrowers individually. Borrowers, therefore, tend to sign only a few forms. Lenders will ask you a few questions, and may look into your credit history. The Dodd-Frank Act of 2010 states that lenders have to make sure that borrowers can pay; that they are not charged humongous rates of interest; and that they are charged no more than two pre-payments (depending on circumstances). Lenders evaluate each application differently and make their conclusions based on your property value rather than on your credit. So even if you have bad credit, you may be able to get your hands on a hard money loan. The lender focuses more on the value of your property than on your credit.

3. Flexible Terms – Banks may demand regular payments. The lender goes soft with you and often provides you with flexible loan repayment terms. (Again, this depends on the specific lender). So, if times are tough you can get by with only paying interest each month or with only paying the balloon repayment at the end. This makes it easier for you in the long run instead of causing you to make a hefty payment each month.

Minuses of Hard Money Loans

1. High Interest – Hard money lenders charge triple the amount of banks – and sometimes even more than that. Lenders can sometimes be capricious in their interest amounts, so it is important to shop around. Some lenders may offer comparatively reasonable rates, but we suggest that you negotiate since lenders know that they are your last resource and they may charge accordingly. Some of the states’ usury laws, such as those of Tennessee and New Jersey, prohibit hard money lenders from invoking excessive interest. Residential borrowers have recourse to further protection under Consumer regulations and the Dodd-Frank Act. If you’re a commercial borrower, you need to be more wary since loan terms are more aggressive and you receive less protection.

2. Low loan-to-value ratios – The loan-to-value ratio is how lenders determine how much money you’re going to get. For example, with a loan-to-value ratio of 70%, the lender will give you $70,000 for a $100,000 piece of property. Lenders usually give only 60% or 50% of your required amount which means that you’ll have to dig up the rest from somewhere else.

3. Hard to locate – An honest and efficient lender may be hard to locate. You can find hordes of money lenders online but each lends only to one or several states and are certified to lend to the states that they deal with. You may have few or none of the lenders that you prefer (or that will service your type of loan) in your region and you may have to travel to get the services that you want. In all cases, make sure that the lender carries licensing from the National Mortgage Licensing System (NMLS) and through her regulatory state agency.

In short…

Hard money loans may be wonderful for you when you need them in a crunch and can’t get the money from anywhere else. They have relaxed approval standards, are fast to get, and involve meager paperwork. On the other hand, they have a low loan-to-value ratio and a high interest rate. If you have good credit, you may be better off with the traditional loan. Consider hard money only if you have a short term pressing need with few or no alternatives.

Yanni Raz is a hard money lender and trust deed investing specialist from Los Angeles California. Yanni write related blogs to educate potential real estate investors. “Before investing your money in any deal, read my articles”