- How much experience in hard money does the broker have?
To ensure a timely funding and desired results, it pays to work with an experienced hard money broker. There are plenty of pitfalls to avoid, and first-hand knowledge of these types of challenges benefit everyone in the transaction. At Cushner Capital Group, we have over 30 years of CA real estate knowledge and experience, the last ten working exclusively in the hard money lending arena.
What is the Interest rate and how many points are typically charged?
Interest rate and points will vary depending upon loan-to-value (LTV), type of property, location of property, and quality of the borrower. If the loan to value is below 50% and the home is in a suburban area, the rates are going to be much better than a mixed use property at 60% loan to value in a rough neighborhood. At Cushner Capital, we understand that pricing is very important and try to find the most competitive rate for every scenario, but also understand that experience and reliability are critical factors as well. If it does not close, it does not matter how great the quoted points and rates were!
What kinds of properties can be financed?
Many requests for private money are due to the fact that the banks guidelines are too strict about issues concerning the property itself, not the borrower. Properties may be too rural or too rough for investor’s appetites. Many times the property has been treated poorly or deemed uninhabitable by banks. Sometimes the property has zoning issues. At Cushner Capital Group, we will find solutions to make sense loans. If that means “fund controlling” rehab monies for the completion of rehab or offering a more sensible loan offer to mitigate excessive risk, we will work to provide suitable financing. We finance most above ground constructed properties in urban and suburban areas. We will look at land and construction on a limited basis, and will go into rural areas in certain cases.
Will you finance Owner-Occupied properties?
With the advent of the Dodd-Frank Act, TRID, and the many new regulations, most private money lenders are staying clear of owner-occupied properties. There are qualifying issues, ability to repay concerns, and numerous disclosures and time frames that must be met promptly and with transparency. We, at Cushner Capital, are doing business with investors willing to work with borrowers seeking financing for their primary residences. We are willing to work with borrowers with a strong down payment and income documentation proof with ficos down to 500! We will work with bank statement self-employed borrowers down to 600 fico scores. We will work with borrowers with huge assets and not enough income documentation! BK, Foreclosure, Short Sale? Yes, they affect pricing, but do not preclude borrowers from obtaining mortgage loans with us! Owner occupied consumer mortgages have no prepayment penalties and require impound accounts, per the new laws.
Are There Prepayment Penalties on these Hard Money Loans?
If the loan is deemed to be a covered loan, typically the case in owner occupied financing, the new rules stipulate clearly that no prepayment penalty can be charged. However, for the investment property owner, commercial or land property owner that is seeking to refinance via private money financing, there may be a prepayment penalty charged. Terms are typically negotiable, and often adding points to the lender upfront can eliminate or discount points. At Cushner Capital, we typically charge an “interest guaranty” of 6-12 months, depending upon the actual term of the loan and the borrower’s realistic exit strategy. Should the borrower be a flipper or rehabber, typically we seek a shorter – 3 months’ interest guaranty.
How long a term are these loans?
The owner occupied first trust deeds are typically for 30 years. Sometimes, if the loan amount is smaller or the loan is in 2nd position, the term may be shorter – 15, 12, 10 or 8 years. All of these options are amortized, meaning that the borrower is paying down the principal as well as paying the interest, and that at the end of the term, there is zero balance. On the investment property loans, the terms are typically 3 years or less, and the payments are typically interest only. There will be a balloon payment at the end of the term, which is typically the entire principal, as most borrowers choose to make the interest only payments for the course of the loan. Sometimes, these loans may go as long as 5 years.
How long does it take to fund the loan?
For owner occupied loans, it typically takes 30-45 days to process and fund, although some of our sources will get it done in 17 days. Owner occupied loans now involve TRID disclosures and time frames. Lenders are prohibited by law from moving forward on drawing loan documents and funding unless certain disclosures have been made and acknowledged by the borrower. Funding can only occur after a Closing Disclosure is received by the borrower, giving the borrower one last review of the numbers, terms, costs, etc. For the investment properties, 10 working days is a realistic time frame. As we are a direct lender for CA investment properties, our underwriting decisions are fast and funding is in house.
What kinds of Loan-to-Value are reasonable?
While the rules in private or hard money lending have become much tougher, loan to value or the equity in a property still remains the key ingredient for hard money lenders. If the borrower has a lot of equity remaining in the property, the lender feels much safer. As the loan to value increases, so does the rate. At Cushner Capital Group, we look at loans on a case by case basis. Maybe there is a cross-collateral property or another redeeming factor that must be examined. We will do purchases up to 75% and refinances up to 70% on investment residential. We will look at commercial up to 65% on a purchase and 60% on a refinance. On land, we will look up to 50% on a purchase and 35% on a refi. We will go up to 65% on a second TD. All of these are parameters, and are subject to review. Sometimes, a borrower or location is so strong that rules can be broken. For owner occupied, we will go up to 85% loan to value…no that is not a misprint.
For answers to more private money questions, please feel free to call Cushner Capital Group at (760) 845-9035, visit our website at www.cushnercapitalgroup.com or email us at Michaelcushner@Cushnercapitalgroup.com.