Hard money lenders have different requirements. Go to a local REI meeting and speak with other investors to get the names of some of the best local hard money lenders.
Some will loan a % based on appraised value. Others will loan a % based on purchase price. It is better to find the ones that will loan on appraised value.
They will give you a break down of your fees with these terms.
1 - Loan Points
2 - Closing Costs (Escrow Fees, Document Fees, Notary Fees)
3 - Interest Amount
So a typical lender might say:
I will loan 60% of ARV (appraised repaired value), with 5 points, 500 in document fees and a 6 month interest only balloon payment loan at 10%.
To translate on a deal that appraises at 200,000.
They will loan you up to 60% (140,000). To get the loan you will pay 7,000 in points + 500 in document fees, and you will pay 1,167.67 on the loan, until you sell the property or 6 mos is up. They will take a trust deed like a typical mortgage and make you sign the other documents like a typical mortgage.
You should probably get the names of lenders before you present a property and pre-qualify with them. There lending requirements are sometimes different then a traditional mortgage (they are most worried about the amount of cash you have, your level of experience, the specific deal and your credit).
Step 1 - Prequalify: talk to the lender and see what they require.
Step 2 - Put a good deal under contract
Step 3 - Call the Hard Money Lender mention what your contract price is, the estimated cost of the repairs, what you think the ARV value is.
Step 4 - They will either send their appraiser or give you an approved list of appraisers and you will get the property appraised.
Step 5 - They may request some of the escrow documents to verify.
Step 6 - They will agree/disagree to do the loan. They will tell you what amount and what terms it will be one.
Step 7 - You fund an amount to escrow, and they will fund an amount.
Hope that makes sense.
Edited Jun 26 2010, 06:57