San Diego hard money is also called private money. This can be a great funding source for bridge loans. A bridge loan is a phrase used to describe short term loans. Bridge loans typically have repayment terms of 12 months or less, but the deadline sometimes runs as far as 24 months.

Bridge loans are used for commercial and residential purposes.

Bridge loans are typically used as a stop gap measure until a borrower is able to secure permanent financing. Since these are short terms loans, they typically carry points and fees that are a great deal higher than conventional bank loans.

In instances where a borrower may need a loan for a short period of time, they may seek private money sources to obtain a loan.

Some examples where a person might use hard money for a bridge loan could include the following:

1. To close a purchase fast

2. To keep a property from being foreclosed upon

3. Refinance an existing loan that’s due or will soon hit a balloon period

4. Take advantage of an opportunity with a quick timeline

5. Tap into equity before selling a property with a cash-out loan

6. Need a short term business loan and you have equity in your property

To be eligible for a hard money loan, you’ll need to show the following:

1. Equity

2. Loan to Value (LTV) of less than 65 percent

3. The ability to repay the loan

In many situations, a property pledged as collateral may not have enough equity. In many cases the private investor may consider additional property as collateral and “cross-collateralize” several properties.

While these kinds of loans can be processed rather quickly and are typically written for 12 months or less, the lender must be sure to fully underwrite the property, the borrower, and the borrower’s credit.

Usually the following items are needed to submit for a loan request:

1. 1003/Application (Lender must provide)

2. Credit Report (Lender will obtain)

3. 2-6 Months of Current Bank Statements (Borrower must provide)

4. Documentation of Income (Borrower must provide)

5. Purchase and Sale Agreement (If applicable)

6. Appraisal of Property (If applicable)

7. Pro Forma (If applicable)

8. Executive Summary (If applicable)

9. Cost Break Down (If applicable)

Typically, a hard money loan can be completed approximately 7 to 14 working days after the lender has received all of the information from the borrower. As you can tell, private money loans close much more quickly than conventional ones. This is why they are a good alternative for those who seek a bridge loan.

Ultimately, these types of loans close faster and are a good option for bridging the gap until permanent financing is in place. As with many loans, there are typically few or no fees that must be paid up front when it comes to a California hard money loan. Loan fees are paid through escrow when the transaction closes in most cases.

If the loan was obtained for a property refinance, fees can often be rolled into the loan. But, if the loan is for a new purchase, the borrower must be able to bring money to escrow before the loan closes.

Example

Refinance example: $200k property value, $100k desired loan amount, and $10k in fees will result in a final loan amount of $110k at 55% LTV

Purchase: $200k purchase price, $200k property value, $60k down payment, $10k fees = $140k final loan amount, $70k paid in to escrow by borrower

San Diego hard money loans can be used for a number of purposes. This article explains the advantages of using hard money for bridge loans. Since hard money loans can be put together faster than bank loans, they are a common solution when temporary financing is necessary.

To ensure that you make the best loan decision, evaluate your situation thoroughly and come up with several possible paths for achieving your goals.

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