Step 1 – Pre-qualify: talk to the lender and see what they require of you and your deal.
Step 2 – Find and put a good deal under contract.
Step 3 – Call the hard money lender and inform them of what your contract price is, the estimated cost of the repairs, and what you think the ARV value is. Here’s a good worksheet to help you out.
Step 4 – The lender will either send their appraiser or give you an approved list of appraisers, and you will then get the property appraised.
Step 5 – They may request some of the escrow documents to verify the paperwork.
Step 6 – They will agree or disagree to fund the loan and will tell you what amount and under what terms it will be.
Step 7 – You close the loan — In many ways, its just like a conventional loan in that you do the closing at a title company or lawyer’s office. The lender puts the loan amount into escrow at the title company. The buyer might have to put in money or might get money back, depending on the deal. The title company issues checks as specified on the HUD; typically, a big one to the seller and points back to the lender. If there’s cash to the buyer, they would issue that check, too. The title company will ensure that all the proper paperwork is completed in the correct order and that funds are sent to the appropriate people.
Steps on How to Get a Hard Money Loan
You spotted a good property and you want to purchase it but you don’t have he right budget. You want to get a hard money loan yet you’re too afraid to acquire one since you don’t know where to start. Don’t fret because hard money loan is not that strenuous to digest. With a little knowledge, bit of computation skills and grasping fully the loan process, you will be good to go.
First step is to pre-qualify for a hard money loan. How to do this? Find the best lender in town, set-up a meeting schedule and talk to them about your loan concerns. Listen to theirs too and see if you can deal with their offer and it fits your wants and needs in a loan.
Second step is to call your hard money lender and inform them of the prices you have on hand for your property. This includes the contract price, the repairs, and your assumed value of the property after rehabilitation. The lender will then send you their appraiser that will check your property and soon give you the appraised value of it. From there, different fees such as interest percentage will depend on.
Next step would be the requirements. In this period of the process, you should show them the best that you got. Getting a loan is like courting. You have to put your best foot forward and wow your lender until you can reassure them that you are capable of paying the loan in return. Some lenders will require passing certain additional papers to verify your capabilities as a borrower. Just be confident and give it all to them. A hard money loan is fast money so make sure to give them all the necessary documents they require you so the process would keep on moving.
After all the paperworks, is the judgment day. The lender will either approve or disapprove your loan request. Once approved, the lender will inform you about the terms of the loan you will be getting from them.
Lastly, when everything is settled and the deal was made, it’s time to put everything in contract. Legality is always a big thing especially when we are talking about money. Anyone can just be as bothersome as how we couldn’t think of it. So, once settled with your best chosen deal, it’s time to put it under a contract and sign some papers. It’s always better to be sure and have those papers back you up whenever unforeseen issues come along the way.