What is a hard money loan?

Hard money loans are known by many names. Private money loan, bridge loans, equity loans, asset loans, rehab loans are some of the terms used to describe loans funded by private parties who want a safe and high return. Lighthouse Financial Technologies acts as both a broker and direct lender who arranges loans for and sells notes to private investors. Because these loans are typically short-term in nature, most have a cost associated with them known in the industry as ‘points’ charged in connection with obtaining the loan. These points, with the exception of large commercial transactions, are usually taken from the proceeds of the loan.

Given the banking climate today, real estate investors use hard money as a leverage tool to purchase more properties, as a way to get cash out of existing properties (to use at trustee sales, etc.) and as a way to execute quickly. These loans are typically non-owner occupied residential or commercial transactions or lines of credit made on pre-existing equity.

Do I have to qualify for a hard money loan?

The short answer is ‘Yes’, but not in the traditional sense. Because these are private money loans, there is more emphasis placed on whether or not a transaction makes sense from both an investor and financing perspective. Hard money is like banking in the days past where we build long-term relationships with you and where we lend money based on project merit, not on scores on a piece of paper.   

How do I start the process?

There are several ways to get started.

First is call us at (951) 296-9363 and we will get you started with a Hard Money / Private Lending specialist who will take your information and we will start working on your scenario.

Second, you can click on the Application tab and fill out the short form. This is sent directly to our underwriting team who will assess your information, assign a specialist and get the process started right away.

Third, simply fill out the contact form and we will have a specialist contact you within 24 business hours.

I need a proof of funds letter

If you need a proof of funds letter, we will, in most cases, provide one to you after you have been approved. Please note that approval or 'Proof of Funds' is not a guarantee or commitment to fund a loan or to provide any specific amount to fund a loan.

What are the terms of a hard money or private money loan?

The terms of a loan depend on the type of hard money, equity or private money loan. Go to our Hard Money Products page and you will find more information on the types of Hard Money products and pricing.

What States do you fund in?

Again, this depends on the type of Hard Money Loan. For most products we are able to lend in all 50 states and for some products we are limited to specific states. As we continue to expand our private money product base, we will update the Hard Money Products and Pricing page.

How long does it take to close the loan?

We have the ability to close a loan in as little as five days. Typically, the process takes 10 to 15 business days because the borrower does not have all of the documentation in place. Once we have everything we need including appraisal, escrow instructions, proof of insurance, and a clean preliminary title report, it takes about 3 days to draw docs, fund and record. If there are special circumstances surrounding your transaction, please communicate them to your specialist so that we can best assist you.

Does credit matter? Foreclosure, Bankruptcy, Short Sale?

As stated earlier, Hard Money Loans are based on the merit of the project and not on your credit score or credit history. That said, if you have had credit issues, we can still most likely do your loan but you will probably pay more points, have to bring in more funds to close or both. It is on a case by case basis. Once you have done several transactions with us, we will have a better understanding of how you do business and may adjust accordingly.

Do you fund trustee sales?

We now offer a Line of Credit product in the State of California that allows real estate investors to take a line of credit against existing properties and use that line to purchase however the investor sees fit, even at trustee sales. This is a great product as the fees are only one time for each credit line until line expiration which keeps the cost extremely low and allows maximum flexibility. Learn more by calling us today at (951) 296-9363, visit our Hard Money Product page or contact us and we will send more information.

Do you fund properties at auctions?

Once you have been approved for this type of transaction, we will issue a 'Pre-approval Letter' stating that you have been approved for an auction property purchase subject to the terms and conditions of Lighthouse Financial Technologies. There are very specific parameters surrounding auction properties so be sure to discuss this with one of our specialists. The terms for this type of financing are the same as for any other residential purchase. The primary factors you need to be aware of when purchasing a property at auction are condition, current value and rehab value.

Do Hard Money Loans have prepayment penalties?

Our hard money / private money loans do not have prepayment penalties. This is one of the major benefits of working with hard money companies. Because investor purchases are typically very short-term, it is critical that there is no penalty to get out of a loan early.

Can I put loan costs into the loan?

Some costs may be absorbed or rolled up into the loan, but the loan to value (LTV) must stay under 65%.

How can I determine property value?

We will not provide an estimated value for you. We can refer you to an experienced reo (bank owned) or distress sale realtor in your area if you need one to help you with the valuation, listing or sale of your home, but we cannot provide an estimated value so please don't ask. The value, repaired or 'AS-IS' will be determined by an independent appraisal that you will need to pay for prior to closing the loan. Also, we will almost never exceed valuation compared to the appraisal.

What happens if we cannot extend a loan for your project?

This is pretty straightforward. There are two main reasons that we would not be able to extend a loan to you.

The first is that the project does not make sense for either you, for us or for our private investor. We have been doing this a long time and understand some of the things that can get you into trouble. Nine times out of ten for new investors the problem is valuation. We are here to help protect you and help protect our private investors. If a project does not meet our parameters we can do one of two things, increase points and decrease LTV until we are comfortable that we have mitigated risk or we can pass on the transaction and we will usually let you know why. Again, our goal is to help protect you. We want you as a client for many transactions, not just one.

The second most common issue with underwriting a loan is that the borrower does not have enough funds to close. This impacts everyone from the new real estate investor to seasoned real estate investors who have their funds tied up in other projects. We sometimes have ways around this if you let us know in advance.

Even if we cannot overcome either of these two obstacles and cannot extend you a loan, it does not mean we cannot help. We have private investors or sometimes we will partner with you to get your project done. It means you equity share on this project but it allows you to build up cash and experience while having the comfort of knowing that we have taken on a share of the liability. If you have questions about this, please contact a specialist today.

Do you wholesale or broker loans?

In rare circumstances and for approved brokers only will we wholesale or broker loans. We do not pay referrals to agents and approval is on a case by case basis. For mortgage brokers, we will price the loan to you but will take over the loan once the terms are agreed to by the borrower. Brokers are protected. Contact us for more information.