After performing a due-diligence on the real estate and accepting an offer, it is essential to learn what the hard money loan process entails. Being aware of this will speed up the process and allow you to secure a loan before the closing date.
Getting in Touch
The process generally begins with getting in touch with hard money lenders San Antonio and explaining the deal to them to see if they would be interested in it. Make sure you are prepared with details of the deal, for instance, the property’s location, purchase price, any construction or rehab budgets, estimated future value of the real estate and your exit strategy.
After this, the lender will determine if you are suitable for a hard money loan, especially if you have not worked with them before. They will inquire you about your experience, credit history, and financials. However, unlike conventional lenders, the underwriting guidelines of hard money lenders are pretty flexible and they place all these different factors on varying levels of priority. Regardless, this information is necessary.
Underwriting
When it comes to property deals, time is an important factor. Fortunately, most hard money lenders in San Antonio should be able to perform an underwriting of the offer within twenty-four hours. Every lender may have a different procedure but the initial items generally required during the underwriting process include:
- A loan application
- A real estate purchase contract
- A statement of work for any renovations including estimated costs and timing
After reviewing these items, the underwriter will schedule an evaluation of the property in question. You may be required to submit additional documents about the project details, your assets, income, credit and overall experience. Once the underwriter has reviewed all the documentation, they will schedule a closing.
Loan Closing
A hard money loan closing involves two transactions. The first is the property purchase and the second is the loan settlement. The property purchase part is straight-forward because you would have already conducted the due-diligence for it whereas the loan settlement calls for the borrower to sign different loan documents depending on the structure of the deal. Some common documents you will be required to sign include a mortgage, a note, a personal guarantee, a security agreement, an assignment of rents and leases and an investment affidavit. There may be additional documents if the deal is more complex.
The funds are already wired to the attorney or the title company. Once the documents are signed, the lender gives a disbursement approval for the title company or the attorney to forward the funds to the seller.
Payoff
After the project is finished, the borrower would be required to pay off the loan. Make sure you carefully consider the terms of the deal as some lenders charge an “interest lock-out” or a pre-payment penalty where you are required to pay some interest regardless of when you pay off the hard money loan (this is not applicable for asset-based lending)
