Hard Money Loans – How Much Money Can You Realistically Expect?

By Author: james brukens
Total Articles: 4
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Are you planning to take hard money loans in order to finance the purchase of real estate? These loans are very popular these days for a variety of reasons, but chiefly because they are easy to get even if the borrower does not have a great credit history or cannot properly document his or her income. There are quite a few hard money loans California companies and you won’t have too much of a problem getting the money you require. However, you first need to understand how much money you can expect to get from your lenders.
Each California hard money loans company has its own criteria for determining how much money has to be given to a particular lender. The amount obviously varies according to the situation. Some hard money loans California companies do study your credit report as well as income statements but this is not always the case. Even if these reports are looked at, they are never given the maximum importance. Hard money loans companies are more concerned with the value of the property because their payments are usually dependent upon this.
It is important to remember that hard money loans usually have ...
... a very low loan to value (LTV) ratio because the property itself is collateral to the loan. This is the way in which lenders protect themselves against defaulted payments. In most cases the LTV is around 60 percent which means that you can expect to get only $60,000 for a property worth $100,000. However, there are a few hard money loans California companies that offer as much as 75 percent of the property value as loan. You will need to find alternate funding for the property in the form of a bridge loan or your own savings.
It is very important to understand that the value of the property as calculated by a hard money loans company is today’s purchase price and not the market value appraisal of the property which is what a bank would do. The value used to calculate the LTV will always be less than the market value of the property because it assumes that the property will be sold under duress, especially if the borrower runs into financial difficulty and might default on the loan.
You need to understand that you will always have to look for another loan even if you are currently approaching a California hard money loans company for funding. However, the ease with which you get hard money loans overrides all other concerns that you might have. It is therefore no surprise that increasing numbers of people are opting for hard money loans for funding their real estate purchases even if it is a costly option.