How do I secure Hard Money...(the details)?

Question

I can't find a definitive answer on these questions.  Please help.

I want to purchase an REO property at about 70% market (accepting cash offers only, as I understand it).  I have $22k (13%) down and the loan would be a total of $170k (including rehab construction).  I want a hard-money loan to purchase this REO, fix it, and "cash-out refinance" to pay the debt on the hard-money (85% LTV, etc).  I expect to pay 2-3 points and 9% on the Hard Money.  My problem so far is as follows...

If I haven't bought the property yet, then how can I secure the funds?  It can't be a regular "Trust Deed" right?  That would have to be afterwards, as I imagine.  So how do I secure it prior to the transaction and show proof of funds in my name (or do funds have to be in my name)?

Can it be done through a standard form or would I have to write something up stating that I would only be using the money for purchase of real estate...and so on, as needed?

Help!
Thanks.

'red

I couldn't find another thread with this information.  Any help would be appreciated.  Thanks.

Account Closed · Answer

Jared,

Why not just call some hard money lenders and ask them? That way you get your answers right from the horse's mouth.

You will be surprised how much information you can get if you can find an HML who is willing to spend a few minutes with you.

Scott Williams · Answer

Three things- Are you sure the property is a good deal? These days 70% of market value can be high, especially if values are still dropping in your area.

You will have a very tough time finding a hard money deal like that, probably be a good bit more expensive.

Are you certain you will be able to refi? Things seem to get worse in this area on a daily basis so make sure you have a sound strategy.

I realize this is not much of an answer to your question, but wanted to chip in having had some refi trouble myself lately.

Jon Holdman · Answer

It works just like any other mortgage. The lender will probably have forms they want to use. The title company will handle getting everything done correctly. No great tricks.

The seller may balk at a hard money loan, if they're saying cash only. Get a letter from the lender, as others have mentioned.

Also as others have mentioned, your expected rates are very low. Even with 20-30% down, you would be looking at two points and 12%.  With your small amount if cash you're going to pay more than that.

Scott M. · Answer

First I would expect to pay more if your going through a HML VS private capitol.

Second there is nothing about your exit strategy in there - most HML will want to know how they are getting paid back and when.

Third - it depends on the lender - some have forms that require you to write out a few paragraphs some don't - since it is private there are no rules.

Steve L. · Answer

You secure it with the property, just like a mortgage (first trust deed).  So technically if you're making a cash offer banks and plan to use a hard money loan, they will complain.  So we typically offer "Cash or Hard Money, with no loan contingency. 14-day closing."

Pre-qualify with a HML lender first and you can ask, how far are you out.  They will usually want prelim and escrow instructions before they can start their magic.

Steve

How do I secure Hard Money...(the details)?

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