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.
In a full loan application for one of our Colorado hard money loans we require:
Materials required depend somewhat on the type of loan and type of property.
For a rehab loan on a single family, the following items would likely be required:
- Completed loan application form
- Rehab items/budget (Schedule of Work – we can provide a template, other formats may also be acceptable)
- The real estate purchase agreement contract (and all disclosures, addenda and amendments)
- Acceptable proof of past rehab experience (items may vary).
- Copies of recent tax returns & IRS form 4506T which allows us to obtain an official copy form the IRS for verification [income amounts are not important, primarily verifying identity]
- Under certain circumstances, we may require special inspections or reports (e.g. suspected structural or mold issues, well or septic system etc.) prior to a loan commitment decision. Sewer scope reports are often required for homes built prior to 1982 or built in certain areas. Asbestos tests and report are commonly required, but depend on the scope and type of repairs/renovations. Additional documents are likely to be required if the property will be occupied at the time of purchase or there is a non arms length transaction.
At some point prior to a loan commitment we need to meet all signers on the loan and take a picture of each driver license (or State ID) and do a property walk through.
For a pre-approval application (for a pre-approval letter), we simply require a pre-approval application and id verification through an person meeting.
(Question and answer applies only to Fix & Flip and Fix & Hold Loans)
Typically 3 to 5 business days provided we have all required information from you (photos of the work completed, lien waivers from your contractors, finalled permits where required, and receipts if required) as well as an opportunity to inspect. We will disburse funds to you either by Electronic/ACH transfer (but typically not Wire) or business check.
After you have completed and paid off one hard money loan with us, typically repeat borrowers are permitted to have up to four concurrent loans with us, but a sum total maximum principal of $650,000, but this determination will be made in our sole discretion and will involve a more in-depth understanding of the availability of your work crew(s).
As a Colorado hard money lender, we require that we hold the first and only lien on properties.
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.