If you’re a real estate investor and need to close your next investment deal quickly, hard money loans may be a great avenue to get the funding you need in relatively short order. Conventional real estate financing can take a few months from start to finish, while hard money loans close in weeks or even as little as a few days in certain situations.
It’s essential to make sure you have all the information and documentation upfront before applying to minimize the time from application to funding. Every process is different, especially with hard money loans. Most terms are determined by the lender and tend to be far looser than conventional loans. Here are some general guidelines from the team at Titan Funding to ensure everything is in order and what to expect from the process.
As alluded to above, the requisite documentation and paperwork for a hard money loan are far less than required when applying for a traditional one, resulting in a simplified process that can be completed much faster.
Photos of the Property
First, you’ll want photos or videos of the real estate you wish to purchase. Focus on visually documenting any part of the property or specific aspects that need to be replaced or renovated. One of the keys to getting approved is making sure the lender can visualize your property and see your vision for it to determine if it’ll be profitable and, thereby, worth the investment.
Estimates for Renovations, Replacements, and Repairs
If you want to do some overhaul, whether it be fixing up some of the lagging aspects of the property, completely renovating, or replacing anything on the property, you’ll want to have written estimates from a licensed contractor. Even if you plan to do the work yourself, it’s advisable to get a third party to give a written estimate of what it should cost to do the work. These estimates need to describe the project’s scope fully and include as many details as possible.
Contract to Purchase
This one is simple enough. Have a contract signed by both parties that delineates the terms of the purchase. Even if the contract isn’t fully fleshed out, including what you currently have as part of your documentation package. Ensure all the terms and conditions are clearly outlined, including any specific instructions for escrow or the title company.
Work with your insurance agent to determine the cost of insuring the property and full details on everything it covers. Include this detailed quote in your documentation package.
Preliminary Title Report
If you can work with a title company to get a preliminary report showing a clean title, that will help expedite the process. The lender will most definitely have a title company they’ll work with before closing the loan, but this will make approval quicker.
Compiling these documents is an excellent start before applying for a loan to help move the process along. Each lender and situation will have some differences, so make sure you gather whatever is needed as quickly as possible.
Loan-To-Value for Hard Money Loan
Titan Funding requires a 60% loan-to-value ratio to be a viable applicant for a hard money loan. If you have the funds for a down payment and can negotiate a price at 60% of the market value, or a combination thereof, you’re well on your way.
Loan-to-value is calculated by taking the current appraised value of the property in question and dividing it by the loan amount you’re asking to borrow. Adding a down payment can help your loan-to-value ratio, also. Reach out to one of the professionals at Titan Funding to see if the property and loan-to-value are good candidates for a hard money loan.
Processing and Underwriting
Once you’ve been approved for a loan, the actual processing and underwriting procedure begins. This process consists of reviewing all the requisite documentation and the lending scenario. Once all that checks out, the next step is to get an appraiser on-site to inspect and determine the property’s value. Further documentation may be needed to verify credit, funds availability, and the potential borrower’s experience with real estate transactions. However, income documentation isn’t necessary, which is odd if you’re used to only applying for conventional financing.
Once the loan has been processed and underwritten, the closing and funding begin. This process is where all the documents are signed, such as the mortgage, personal guarantee, assignment of the leases or rents, and investment affidavit. Again, the documentation can vary per transaction, but these are common ones that are usually present.
When all the proper documents are signed, and the closing agent and underwriter have reviewed the proceedings and are satisfied with the results, the funds will be disbursed. The disbursement will be direct to the seller or the borrower, although disbursing to the seller is the most common as it’s the most secure.
Titan Funding is one of many Florida hard money lenders but one of the few designed to meet your needs fully. You’ll have a hard money loan decision typically within 48 hours with Titan Funding. After approval, typically, you can get funding in as little as four days, provided everything is in order, and everything else moves smoothly. Once payments start, you only pay the fixed-rate interest during the short term of the loan. Titan Funding hard money loans typically are $100,000 minimum and go up to $5 million, which can help boost your portfolio quickly.
For more information on hard money loans, contact the experts at Titan Funding. We’re available at 855-931-4769 Monday through Friday from 9 a.m. to 6 p.m. or via our secure online contact form 24 hours a day, seven days a week. Our financial experts can answer any questions or discuss our funding options, including hard money loans. Titan Funding is conveniently located at 2701 NW Boca Raton Blvd., Suite 105, in Boca Raton, Florida.