A hard money loan in California gets decided on the property, and mostly on the equity in it. Your credit score isn’t the gatekeeper. We don’t have a minimum FICO requirement, so the first things we want to know are what the property is worth, what’s already owed on it and what you plan to do with the money. Proof that you can repay the loan comes next.
Below is how it runs on our end, which borrowers banks tend to pass on that we’ll still look at, how fast a loan can move and where hard money stops making sense.
What a hard money loan is
It’s a short-term loan secured by real estate and funded with private money instead of a bank’s deposits. The property is the collateral. If a loan goes unpaid, the property is what’s at stake, which is why equity carries so much weight.
One filter first. The loans we work on are for business and non-consumer purposes. A refinance on an owner-occupied home can qualify when the proceeds go to a business purpose. Personal loans don’t fit, and neither do equipment loans or anything else that isn’t secured by real property.
What we look at
Equity comes first. Most of our loans rest on the property and the equity in it, so we start with value and the amount owed. Our online request form asks for the loan amount, the purpose, the property address and type, an estimated value and the purchase price if you’re buying.
Repayment comes next. Property-based doesn’t mean we stop asking whether you can pay it back. We typically ask for proof of your ability to repay the loan, and the request form asks how you plan to use the proceeds.
Borrowers banks tend to pass on
If you’re self-employed and your tax returns show little income, that doesn’t close the door, because most of our loans rest on the property. The same goes for owners who haven’t filed taxes in a few years. We lend to borrowers with poor credit. Vacant properties are fine. So are properties in disrepair, and properties already listed for sale.
Foreclosure is a case-by-case call. We have a very small handful of investors who will consider it, so we won’t promise it.
Entities work too. We can lend to a trust, a corporation or an LLC. Raw land is the exception worth knowing about, since we lend no more than about 25% of fair market value on vacant land. And we lend across California, and sometimes in other Western states.
How a loan moves from request to closing
You send the online request. A licensed loan officer reviews it and contacts you. We don’t need every form in the application package before we put a written proposal and a Letter of Intent in front of you, so you can see terms before you start collecting documents.
Once you sign the Letter of Intent, we build the full loan file. Final loan documents follow, then escrow, where you sign in front of a notary, and then the deed of trust is recorded.
How fast it moves
We can fund in as little as 5 days. Most loans take 10 to 14 days from start to finish. After you submit the request, a licensed loan officer should contact you within a few hours, and it can take longer if you send it on a weekend or a holiday. At that stage there’s no obligation, no cost and no credit pull.
We’d rather give you the real range than a promise. Plan around the 10 to 14 days and treat 5 as the good outcome.
What it costs
The points charged depend on the loan amount, the type of loan and many other factors, so there’s no single number to quote here. We will provide a written good faith estimate or conditional loan proposal.
Hard money costs more than a bank loan, and that’s the trade for speed and flexibility. Compare total cost instead of the headline rate, which means points, interest and how long you expect to hold the loan. Ask about prepayment penalties too. Most of our loans don’t have them. Most do require monthly payments, with only a few rare exceptions.
When it’s the wrong tool
If a bank will lend on the deal and you have the time, the bank loan will usually cost less. Hard money earns its place when the clock is the problem, when the property doesn’t fit a bank’s rules or when the paperwork doesn’t.
Start with the request
If you’ve got a property and a plan, send it through our loan application page. Tell us the value, what’s owed and what the money is for. If you’d like the vocabulary first, our post on hard money loan terms covers points and loan-to-value, and the private money lending page and our FAQ show how the programs break out. Real numbers come from a loan officer, not from this page.
GW Private Capital, Inc. is licensed by the California Department of Real Estate #01988401. This article is general information and not a commitment to lend.
