Proof of income. Credit score. Credit history. Income to debt ratio. If you’ve ever applied for a loan, you know the drill required by most lenders. Before they approve a loan, they need to see proof of these things and others. With a hard money lender, the focus is on the collateral you have to offer, but there is some required documentation to approve your loan.
What can you expect when applying for a hard money loan? When comparing a hard money loan to a traditional financing means, the benefits are appealing and multiple. What are those benefits?
At RTI Bridge Loans, We know California Real Estate and every facet of what makes it tick, enabling us to provide our clients the funding they need when they need it. If you are looking Hard money lender near your area, Give us a call at (562) 857-2285, and we can explain the hard money loan process.
Hard Money Loans – The Documentation
- Hard Money Loans – Multiple Types
- Hard Money Loans: What Are the Required Documents?
- Hard Money Loans for Real Estate Investments – No need for Additional Documents
- The Costs and Fees by Hard Money Lenders
California Hard Money Loans – Multiple Types
There are two classifications of hard money loans, and no two hard money loans are alike. There is one consumer loan and another one is the non-consumer loan in which lending for Investment property or commercial property comes in. Whatever type of loan you apply for will have different documentation requirements. Let us dive into the documentation required for the Hard Money Loans for Real Estate investment purposes.
The documentation requirements for hard money loans for Real Estate Developers and Investors are not as cumbersome as a consumer loan. These loans generally require fewer documentation requirements and do not require additional documents determined and established by federal regulations, even for hard money lenders in California.
Hard Money Loans: What Are the Required Documents?
The disclosures and documents required for the hard money loans must be completed and include:
- 1. The Application
- 3. The Equal Credit Opportunity Act Notice
- 4. The Mortgage Loan Disclosure Statement
- 5. The Fair Lending Notice
- 6. The Hazard Insurance Disclosure
- 7. The Deed of Trust
- 8. The Escrow Instructions
- 9. The Promissory Note
1. The Application
An application is always the first document to be submitted when applying for a hard money loan. There is the information required about the loan’s plans and purposes, such as the collateral and your income. Each hard money loan lender will have their number and type of details they require on their application, and it is that information that will help them determine your loan specifics.
As with a traditional loan process, hard money lenders usually will provide a document stating how the hard money lender uses your personal information once you submit your application.
3. The Equal Credit Opportunity Act Notice
Like the traditional loan process, federal law prohibits hard money lenders from discriminating against a borrower because of age, marital status, race, religion, sex, and more. The Consumer Credit Protection Act requires hard money lenders to provide investors notification of these requirements.
4. The Mortgage Loan Disclosure Statement
The Mortgage Loan Disclosure Statement is a document given to borrowers by the lender that provides specific information about the loan terms, including any cost or fees associated with obtaining the loan.
5. The Fair Lending Notice
The Equal Credit Opportunity Act Notice is a federally required disclosure stating the lender’s obligation to avoid certain discriminatory practices.
6. The Hazard Insurance Disclosure
This required documentation describes a borrower’s right and responsibilities to retain insurance coverage on the collateral offered for loan securement.
7. The Deed of Trust
This documentation brings in a third party that will ensure the borrower and lender uphold their specific responsibilities, as stated in the loan agreement. This document designates who the third party is and what they are responsible for while keeping the property deed until the loan terms are satisfied. The third party is a trustee and will surrender the property deed to the borrower once the loan has been satisfied.
8. The Escrow Instructions
The details of escrow instructions are requirements the escrow company is responsible for seeing through. It describes each of the conditions that are to be satisfied for the loan to be completed.
9. The Promissory Note
The main document that of the loan process. Your signature is your promise to make the payments as detailed on the dates specified until the loan is paid in full. The rules stated in this document that the trustee must follow ensuring that everyone does their part to finalize the agreement once all stipulations are satisfied.
Hard Money Loans for Real Estate Investments – No need for Additional Documents
The additional documents that are more cumbersome for a consumer loan are apparent – more documentation. You do not need to worry about following additional documents for hard money loans when you need funding for real estate investing.
» Proof of Income
In California, that proof of income needs to be documented by recent bank statements, paycheck stubs, tax returns, and W2s. This only requires in case of lending to the borrower, not for investment property or commercial property hard money loans.
» Proof of Assets
Where a down payment is required or the lender has a financial reserve requirement, the borrower may need to show proof of possession with documents like bank statements, no need for hard money loans for real estate investments.
» Debt Documents
This documentation allows the lender to verify payments are not going overburden the buyer with a debt-to-income ratio. A real estate investor or developer does not need to offer additional documentation on any outstanding debt that has been paid in full.
» The Loan estimate
Hard Money loan lenders are required under the Dodd-Frank Act to provide the borrowers with a loan estimate document regarding all loan costs, fees, and states the interest rates, monthly payment, and more but not in case of funding to Investors.
» The Closing disclosure
Like the Loan Estimate, this document includes much of the same information in addition to other information like the closing date and fund disbursement date which hard money lenders in California, RTI Bridge Loans do not require in case of lending to real estate investors or developers.
Further, there is no requirement for additional documentation which requires in case of other hard money loans but not related to real estate investments like,
» An Oral Disclosure
» The Right of Rescission
» Homeownership Counseling
» The HOEPA Disclosure
The Costs and Fees by Hard Money Lenders
There aren’t any upfront fees when borrowing from a private and hard money lending company. However, some private lenders charge other fees before funding the loan. While caution is recommended to the borrower, these costs and fees typically aren’t an unusual cost or fee in the realm of private lending. Some of the fees that are common include:
» An Appraisal Fee:
Most hard money lenders do not require an appraisal. The few that do will charge the borrower a fee, which is paid directly to the lender.
» A Deposit:
This is typical of hard money lenders when the loan is a commercial real estate bridge loan. When a hard money lender charges a deposit, they have already decided they are funding the loan, and the deposit is a commitment from the buyer.
» A Site Visit Fee:
When a private money lender only lends in one market, they often visit the property the loan request covers and meet with the investor there. This fee covers their time and travel, which could be anywhere in the United States. The site visit fee is included in the deposit of a common for a commercial bridge loan.
About RTI Bridge Loans
A Direct Portfolio Lender, RTI Bridge Loans has focused on Short Term Bridge Loans since 2004, secured By First and Second Trust Deeds. With our in-depth knowledge acquired over the years, we are experienced and versed in every real estate industry facet. RTI works efficiently, providing prompt responsiveness with specific execution that earned us a stellar reputation. Contact us or call us now at (562) 857-2285 to learn more about what documents are necessary for a Hard Money Loan in California, CA.