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What is a hard money loan?

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.

Why would a business want a bridge loan?

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.

Why does divorce sometimes result in a hard money or bridge loan?

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).

What is a hard money lender?

A “hard money lender” is a lender who makes loan decisions mostly based on the underlying value of the property (aka the “hard asset”).  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 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 lender” 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.

What provisions in the Contract To Buy And Sell Real Estate do I need for Colorado hard money loans?

Financing provisions are a common area of confusion. We do not provide legal advice. You should speak with your real estate agent and your own attorney at your own expense. Often we see something in Section 4.5.3 of the commission approved Contract To Buy And Sell Real Estate where “Other” is checked and the blank is filled in along the lines of: “cash, private money loan, or other financing as selected at the discretion of the Buyer”. However, that may not be correct, sufficient, adequate, or appropriate.

Colorado Hard Money Financing Provisions

Colorado Hard Money Financing Provisions Section 4.5.3 from Contract To Buy And Sell Real Estate (Residential) (CBS1-6-15)

This post likely to become out of date as forms Colorado Real Estate Commission are changed. As of May 2017, Colorado Real Estate Commission approved forms can be found on the Colorado Division of Real Estate contracts and forms webpage.

Want a term sheet or to start the application process? Submit a Loan Inquiry (free)

What is needed/included in a full application (as opposed to a pre-approval application)?

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.

Why is a Colorado Hard Money Lender named “Good Funds Lending”?

As “The Colorado hard money lender for experienced real estate professionals™“, we are focused on providing ethical and good service and we reliably fund our loan commitments.

In financial and real estate transactions the term “good funds” often means funds that are bank guaranteed or immediately available, which typically include cash, cashier’s checks, certified checks, bank money orders and sometimes other forms.

As a Colorado hard money lender we want borrowers to associate our name with real estate transactions and the reliability of “good funds”.