Hard Money / Private Money loans

Today I want to explain how private money/ hard money loans work, and why the purpose of the loan matters.
Private money loans are not your standard conventional, FHA, or VA loans. They are usually used when a deal does not fit inside the normal lending box.
These loans can be very helpful when a client is buying a property that needs work, has health and safety issues or deferred maintenance, does not qualify for traditional financing, or needs to close quickly. 

A lot of investors use private money loans for:

• Fix-and-flip properties
• Rental properties that need repairs
• Properties with condition issues
• Homes that need to be improved before they can be rented or refinanced
• Borrowers with rough credit
• Borrowers who show little or no income
• Borrowers who need a short-term solution before moving into long-term financing
• This is where we do a large amount of private money lending.

Often, the client buys the property with private funds, fixes it up, and then either sells it, rents it out, or refinances it into a longer-term loan. In some cases, the borrower may buy the property, complete the repairs, and eventually move into the home after the work is done. Still, the initial purpose is to have it as an investment property until it is repaired.   

The big thing to understand is the difference between business purpose and consumer purpose. 

A business purpose loan is usually for an investment property, rental property, fix-and-flip, or commercial use. Since the property is being used for business or investment, private money lenders often have more flexibility. They may focus more on property, equity, repairs, value, and exit strategy rather than traditional income. 

A consumer purpose loan is usually when the borrower is buying or refinancing a home, they plan to live in. These loans have more rules. Even if the borrower makes a large down payment, the lender will still need to verify income and ensure the borrower can repay.
This is why most private/hard-money lenders prefer business-purpose loans. They are usually easier to structure and have fewer restrictions than owner-occupied consumer loans. 

For example, if an investor buys a damaged property, fixes it up, and plans to rent it out or sell it, that is usually business purpose. Private money can be a great tool for that type of deal.
But if a client wants to buy a home to live in, has poor credit, shows no income, and wants to use private money just because they cannot qualify for a regular loan, that becomes much harder. Since it is owner-occupied, it is usually for consumer purposes, and many private money lenders will not make those loans. the ones that will require the borrower to qualify based on their income or bank statements!  

Private money is not just for people in trouble. It is a tool.
It can help buyers close on properties that banks may not touch. It can help investors buy homes that need work. It can help clients move quickly, address property condition issues, and create a path to sell, rent, refinance, or move in later. 

I handle a significant amount of private money loans. When a traditional loan does not work, private money may be the bridge that helps the client acquire the property, address the problem, and create a long-term solution. 

Interest Rates

Rates are a little better today, even though we are fighting with our friends from Iran again. Like I used to tell my children, you can fight as long as nobody gets hurt. Or in this case, as long as the oil passes through the Strait and it doesn’t hurt our wallets. LOL!   

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s –
• Conventional (≤ $832,750): low 6s
• High-balance: mid to high 6s
• Jumbo: Mid 6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans  

Rates subject to change without notice. 

Condo Update
Good news:

• Heather Ridge – Off the naughty list and back in business! New Insurance policy and a new life!    

Bad news:

• Del Prado  – Newhall – Critical Repairs – Deferred maintenance
• Palisades -  25730 Armstrong Stevenson Ranch CA 91381 – Critical repairs   – Deferred maintenance  – reserves  –  Insurance!  Yes, they hit just about every bad thing you can!  LOL! 
• The Legends at Cascades  – 16702 Niklaus Drive Sylmar – Insurance deductible too high!  
• Tres Robles 3  – Critical repairs – deferred maintenance  
• Vera Townhomes – 43334 32nd Street West Lancaster – Reserves are too low!  

We love your Non-Warrantable Condo loans!! And God knows there are lots of them!
Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California "naughty list" available here:
https://mikemeena.com/non-warrantable-condos/

Let's Connect
If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,