A “hard money loan” is a loan in which the loan decision is primarily based on the value of the property (the “hard asset”). This is in contrast to criteria such as income history, and credit history. Hard money rates often are higher than long-term rates. However often banks are not fast enough or have reasons preventing a loan. Banks may require high credit scores, high taxable income, and lots of verification, etc. Alternatively, hard money lenders often have very few criteria. Hard money lenders often can underwrite and fund a loan in a matter of days rather than weeks or months. The term “hard money loan” may mean different things to others. Property value is the primary concern for Good Funds Lending, LLC. Good Funds Lending, LLC is not concerned about credit scores or income but considers other aspects of borrowers.
There are several reasons why a business might want a bridge loan while waiting for a bank loan. Sometimes a transaction needs to happen quickly or the business owner needs liquidity quickly, but the bank needs more time to process the loan. Sometimes a bank can’t provide the loan until more time has passed after a credit or income hiccup.
Sometimes income or rental property needs to be quickly refinanced after or during a divorce. An ex-husband or ex-wife may no longer willing to be a borrower or guarantor. Sometimes a divorce damages one or more of the ex-spouses’ credit. The ex-husband or ex-wife may not have sufficient income to get a bank loan without the ex-spouse. However, a divorce decree may require the ex-spouse to no longer be a borrower or guarantor on the promissory note. Often with time a spouse may repair his or her credit, sell the property, or provide sufficient income to get longer term loan. Good Funds Lending, LLC provides loans secured by investment properties only (not properties intended for personal, family or household use). Good Funds Lending, LLC does not provide loans for personal residences (rental and investment properties only).
We can work with borrowers to utilize a “soft pull” credit history service such as CreditKarma.com.
We may as it is important to us to know if borrowers are in trouble. We may not look at credit history for every loan with repeat borrowers (We do not pull credit reports for pre-approval applications). We are a hard money lender, so our loan decisions are primarily based on the underlying value of the property (“hard asset”); However, even as hard money lenders, we do consider recent credit related behavior among other factors.
As a Colorado hard money lender, we will only make loans as the first and only lien holder on a property. In our loan agreements, you will agree not to further encumber the property (e.g. no 2nd mortgage, other liens etc.). You should plan to have cash available for 3rd party closing costs (title insurance, closing fees), holding costs (insurance, taxes, utilities), property maintenance and cleaning expenses, staging expenses, cost overruns, other expected or unexpected expenses and rehab labor and material expenses (until you receive rehab draws, if you have a rehab draw account). If you borrow money for any of these purposes, it may not be secured/collateralized with the property or items attached to the property.
We closely look at the borrowers’ exit strategies. We do look at the borrowers ability to pay their expenses. Some of our hard money loans have payments of $0 until payoff (unless there is a default); Obviously, in such cases, $0 loan payments do not concern us, but we are concerned with your ability to successfully complete the project and have funds available for related expenses. If we do not think you can pay your expenses which may include utilities, insurance, monthly loan payments (if any), taxes, repairs (or some repairs before drawing rehab funds, if there is a rehab account), monthly loan payments (if any are called for), etc., and pay off your loan via the planned exit strategy we will not make the loan.
In general no, we will only loan as the first and only lien holder. As the loan is a hard money loan we want the hard asset (i.e. the property) to be unencumbered by other loans, whether subordinate or superior to our loan. In some cases we require a first lien on the project property and may be secured by junior liens on other properties.
No, you will need to have cash available for 3rd party closing costs (title insurance, closing fees, etc.).
The extension automatically occurs after the initial term (typically 180 day period) unless you have paid off the loan or there has been a default. On the first day of the extension period (typically day 181), your extension payment of 0.3% of the outstanding principal amount (includes any accrued interest that has been added to the initial principal) is due. (extensions only available for the Fix & Flip and Fix & Hold loans).
Why are your rates lower than the typical 3 to 4 points (i.e. 3-4% origination) and 14-15% interest?
We work hard to keep our costs down so we can provide very competitive rates. We also try to minimize unnecessary costs for our borrowers (e.g. single family properties do not require an appraisal).
- We use one source for funds, so we are the final decision makers and do not need to consult with or comply with anyone else in making our lending decisions, restrictions and rules. We don’t have to compete for additional money sources that may require higher rates.
- We work to keep our overhead low.
- We underwrite in-house and don’t need to spend resources communicating back and forth with other parties.
- For rehab/ fix and flip loans we look at borrowers’ experience and qualifications to lower risks and costs to all parties.