Getting a loan in Los Angeles when you have bad credit or no credit history can be challenging. As a borrower, you’ll need to submit an application listing your income information and agree to a credit check before your loan application gets approved. Financial institutions prefer to work with clients who have a clean credit history and earn enough money to honor all the terms and agreements of a loan.
As a real estate investor, you don’t always have the luxury of getting approved for a conventional real estate loan. Whether it’s spotty payment history, lack of downpayment, or a low credit score, you might find it hard to find financing. Los Angeles real estate investors often miss out on great deals because funding is unavailable or inefficient. However, there’s one option to consider: a hard money loan.
So, where should investors go for hard money lending in Los Angeles? And how can you choose the best hard money lenders Los Angeles has to offer? Here’s all you need to know.
Table of Contents
- » How to Get a Hard Money Loan with Bad Credit
- » Do You Need Good Credit for a Hard Money Loan?
- » Where to Find a Hard Money Loan
- » What are the Requirements for a Hard Money Bridge Loan?
- » Can You Fix Your Credit Score with a Private Lender?
- » How Hard Money Lenders in Los Angeles Can Help You
- » What is a Hard Money Loan?
- » How Long Does it Take for a Hard Money Loan to Close?
- » Need a Hard Money Loan in Los Angeles?
How to Get a Hard Money Loan with Bad Credit
How do you qualify for a hard money loan in 2022? What are the Los Angeles hard money loan requirements? Where can you get hard money loans for bad credit in California?
To get informed about how to get a hard money loan in Los Angeles and the rates and requirements, keep reading!
Do You Need Good Credit for a Hard Money Loan?
First thing’s first, do hard money lenders pay attention to your credit score?
Not really. The hard money lender is typically more interested in the property used as collateral than your credit score, making it a more flexible option for many investors. Some Los Angeles hard money lenders require a credit check, though, and some even have minimum credit score requirements, so make sure you understand the lender’s policy.
Where to Find a Hard Money Loan
When you’re used to visiting a bank for traditional loans, the task of finding a hard money lender can feel unnerving. However, as soon as you know where to look, the process can feel much more effortless. Most Los Angeles real estate investors return to the same hard money lender each time they need funding for their fix and flip or rental property. Over the years, you will likely develop a good relationship with the lender.
The first place to look is online. You can type “hard money loans near me” in Google to see the results. The search engine results page should then provide you with a shortlist of hard money lenders in California to sift through. You can also seek recommendations from real estate investment clubs, either online or in your local community. Last but not least, you can ask any real estate agents or brokers you know for advice on where to get hard money lending help.
Also Read: The Complete Guide To Fix And Flip Loans
What are the Requirements for a Hard Money Bridge Loan?
While hard money loan requirements vary from lender to lender, there are three main requirements for hard money loans:
» Equity/Down Payment
Equity is the main requirement for getting a hard money loan in Los Angeles. Like a traditional mortgage, hard money loans still call for a down payment and closing costs to secure the loan.
This amount usually ranges between 25% to 30% for residential properties and 30% to 40% for commercial ones.
In some cases, a hard money lender might allow you to use multiple properties to secure a single loan (cross-collateralizing).
Your hard money loan request is more likely to get approved if you have a more significant down payment or a higher amount of equity. The more you invest in the property, the lower the risk is for the lender.
» Financial Strength
Hard money lenders also want to ensure that borrowers have the cash reserves to pay holding costs and monthly loan payments.
Like equity, the higher the cash reserves you have, the more likely you are to get a hard money loan approved.
» Real Estate Experience
Yes, most hard money lenders want to know about the borrower’s experience in the Los Angeles estate market.
What if you have no experience?
Even new real estate investors can secure a hard money loan in Los Angeles even though they might have a more challenging time than seasoned real estate veterans. If you have little to no experience, the hard money lender will ask for the details of the project and whether you have an exit strategy for the property at hand.
Can You Fix Your Credit Score with a Private Lender?
It’s very easy to get bad credit but super hard to get rid of it. But did you know that hard money bridge loans can even fix your credit score?
You probably know by now that hard money loans do not have a minimum credit score requirement. Suppose you are a Los Angeles investor who owns an investment property with a significant amount of equity (at least 50%). You can obtain a hard money bridge loan, pay off your debts and improve your credit score. You can then refinance back into a conventional loan once qualified.
How Hard Money Lenders in Los Angeles Can Help You
Are you an investor who doesn’t qualify or doesn’t want to deal with the stringent requirements of conventional bank loans?
While banks can lend at much lower rates, their criteria are more stringent. While banks evaluate your financial strength as their primary qualification, Los Angeles hard money lenders consider investment property as the primary qualification. It requires much less documentation and allows them to fund you more quickly. Hard money lenders even use the after-repaired value to calculate your loan, something few banks will consider.
What is a Hard Money Loan?
A hard money loan is a bridge loan backed by a hard asset, the asset being real property that produces a profit to repay the loan quickly.
Investors use hard money loans in Los Angeles for real estate transactions, with the lender generally being individuals or companies rather than banks. These private lenders are most interested in the fundamentals of the deal, such as the after repair value or ARV, rather than the borrower’s credit score and credit history.
Since hard money loans are short-term, high-interest loans, they only make sense for real estate investors that are getting a great deal on investment property and plan to resell or refinance the property in three to 12 months.
» How Does a Hard Money Loan Work?
Unlike traditional lenders, hard money lenders don’t operate within specified guidelines and underwriting. However, most lenders cap hard money loans at 75% LTV (loan to value) or less.
Essentially, the higher the loan-to-value ratio is, the riskier that loan is for the hard money lender. Therefore, you’re only likely to see high LTV ratios for investors with a strong credit history coupled with a promising investment. It is why experienced real estate pros with a successful investment history, assets, and a strong credit score give lenders some additional confidence. Even so, hard money lenders take much less interest in an investor’s investment and credit history than conventional lenders do.
Hard money loans are sought after by fix-and-flip investors who plan to renovate and resell the property used as collateral for the financing as soon as possible. You can offset the high cost of a hard money loan by the fact that you intend to pay off the loan relatively quickly (most hard money loans are for one to three years), and some of the other advantages they offer, including shorter closing times.
How Long Does it Take for a Hard Money Loan to Close?
Los Angeles real estate investors prefer hard money loans over traditional loans because of speed.
Hard money loans can take about five to seven business days from initial contact to funding if everything is ready to go. At RTI Bridge Loans, we have even closed deals in as little as 24 hours.
Need a Hard Money Loan in Los Angeles?
RTI Bridge Loans funds Los Angeles real estate investors. We offer exceptionally well-secured investments backed by Los Angeles real estate.
Do you need financing for your upcoming real estate project? Look no further than RTI Bridge Loans. RTI Bridge Loans has the perfect selection of hard money loans for property investors in Los Angeles. It doesn’t matter if you are a fix-and-flip specialist or a buy-and-hold investor; RTI Bridge Loans has a variety of different financing options available to suit the needs of any real estate investor in Los Angeles. Run by a team of seasoned real estate professionals, we are here to make sure our investors win at California real estate.