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Hard Money Loans

What is a hard money loan?

A hard money loan is a short-term real estate loan, usually given to real estate investors for a period of 6-24 months. Loan amounts are based upon the value of the real estate asset(s) rather than the credit quality of the borrower. Hard money lenders are individuals, family offices, or mortgage loan funds.

What are the closing costs of a hard money loan?

Closing costs on hard money loans vary depending on many factors. Loan origination fees range between 1-6 points. Generally, lower Loan-To-Value (LTV) loans have lower origination fees while riskier loans have higher origination fees.

What are hard money interest rates?

Interest rates on hard money loans range from 7.50% to 13.99%. Rates starting at 7.50% are for lower Loan-To-Value (LTV) loans of 50-60% LTV on 12-month bridge loans. Higher rates of 13.99% are on “piggyback” second mortgages as part of a fix and flip loan, where the lender issues a first mortgage at 10.00% and a second mortgage for construction at 13.99%.

How do I obtain a hard money loan?

To obtain a hard money loan, a borrower could either apply directly with a lender or they could work with a mortgage broker specializing in hard money loans to find the right lender. Hard money lenders usually have a narrow focus of the types of loans offered, so it might benefit a borrower to apply through a hard money mortgage broker to be matched with the lender whose lending niche fits the borrower’s needs.

How do I qualify for a hard money loan?

To qualify, a borrower needs to determine if the loan will be for consumer purpose (owner occupied and second homes) or for business purpose (investment, rental, etc). Then, fill out the appropriate mortgage application for underwriting by providing the required personal and financial documentation, title report, and property appraisal.

What are my options when my hard money ballon payment comes due?

Three options when a hard money balloon payment comes due is to sell the property, refinance into a new loan, or extend the hard money loan. Selling the property is common when the borrower has a hard money bridge loan where the original plan was to sell before the balloon payment coming due. Borrowers can also refinance into another hard money loan or into a conventional loan. If payments have been made on-time during the term of the loan, many lenders will extend the loan prior to the balloon payment coming due.

Do hard money loans require an appraisal?

Most hard money loans require an appraisal or Broker Price Opinion (BPO). However, First Capital Trust Deeds works with some hard money lenders in California that, after reviewing comparable sales (comps), will do a site inspection rather than have a formal appraisal completed. The general rule of thumb with a hard money loan is to expect that an appraisal will be required.

Do hard money loans have a prepayment penalty?

Some hard money loans have a prepayment penalty while others do not. It depends on the lender and what they require. Some lenders, instead of instituting a prepayment penalty, will require an “Interest Guarantee” (IG). A common IG is 3 months of interest, or 3 payments, on a 12-month bridge loan.

How is a prepayment penalty calculated?

The standard prepayment penalty is calculated at “80% of 6 months interest.” If the monthly interest payment was $2,000/mo, then it would be calculated as:

$2,000 X 6 = $12,000 X 0.80 = $9,600 Prepayment Penalty

What is an interest guarantee on a hard money loan?

An interest guarantee on a hard money loan is a requirement that a borrower pay a make a minimum amount of monthly payments. Often, with a 12-month hard money bridge loan, the lender will require an interest guarantee of 3 months, meaning that even if the borrower paid off the loan after making two payments, the borrower would still owe one additional payment as part of the 3-month interest guarantee.

Will a hard money lender set aside 12-months of payments out of the cash cash-out proceeds of my loan?

Yes, hard money lenders can set aside 12-months of payments into an escrow account to make monthly payments on a loan. On luxury spec home bridge loans where the property is listed for sale on the market, this practice is very common.

Why does a hard money lender want to review my bank statements if it's an asset-based loan?

Even though the hard money loan is considered “asset-based”, the lender still wants to make sure the borrower is on solid ground financially. Hard money lenders prefer borrowers with liquidity to service the debt payments and want to make sure that the borrower has a likely exit strategy when the balloon payment comes due. It’s a better business practice to lend to performing borrowers rather than make loans with a higher likelihood of default.

Do hard money lenders make loans to self-employed borrowers?

Yes, hard money lenders make loans to self-employed borrowers. The majority of the loans First Capital Trust Deeds originates are made to self-employed borrowers who are mostly self-employed real estate investment professionals.

Can I get a hard money loan if I've been self-employed for less than two years?

Yes, you can get a hard money business purpose loan if you’ve been self-employed for less than two years. For an owner occupied consumer purpose loan, qualifying for a hard money loan with less than two years self-employment is on a case-by-case basis. But for business purpose investment loans, less than two years self-employment is fine.

Do you finance purchases through online auction companies like Auction.com?

Yes, First Capital Trust Deeds has financed dozens of properties with hard money loans for investors through online real estate auction companies like Auction.com. In addition to Auction.com, FCTD has worked with buyers of the following auction sites:

  • Hubzu.com
  • Xome.com
  • Realtybid.com
  • Foreclosure.com

Bridge Loans

What are the lowest interest rates for hard money bridge loans?

The lowest interest rates that First Capital Trust Deeds originates with hard money lenders and private money lenders for bridge loans starts at 6.90% for 6-month term on loans above $10,000,000 in California. Most hard money and private money interest rates range from 7.50% to 10.00%, with loans at a lower Loan-To-Value (LTV) often having a lower interest rate and higher leveraged loans carrying an interest rate closer to 10.00%.

What are the closing costs on hard money bridge loans?

The closing costs on hard money bridge loans range from 1% to 6% of the loan amount, known as loan origination “points.” In addition to origination points, the lenders and hard money mortgage brokers often charge underwriting, doc prep, and loan set up fees for work done originating the loan.

How long is the term for a hard money bridge loan?

Hard money bridge loans usually have terms ranging from 3-24 months. Most hard money bridge loans are written for twelve months. First Capital Trust Deeds has originated a 45-day loan for a buyer in the Bay Area who already had an end-user ready to buy the property at a profit within 20 days of close. That is the shortest loan FCTD has ever originated. The general rule of thumb for hard money bridge loans is twelve months.

How do I extend hard money bridge loan?

To extend a hard money bridge loan past the initial 3-24 month term, it is recommended that the borrower has made on-time payments for the duration of the loan. The next step is to submit a written request to the lender, who, if they are an investment fund, may require the borrower to re-apply for the extension by providing an updated application, financial statements, rent rolls, and a new appraisal. Other lenders, such as individual trust deed investors, may just approve the extension for the borrower without requiring updated documentation. Every hard money lender has their own system for extending bridge loans.

What is the cost to extend a hard money bridge loan?

Each hard money lender has their own cost structure for extending a bridge loan. Some lenders charge 1 Point, or 1% of the loan balance, to extend the loan by three months. Other lenders will charge 1 Point to extend the loan for another 12-months. Since hard money lending is a small part of the mortgage industry, there is not a universal answer to the cost to extend a hard money loan.

What is the balloon payment on a hard money bridge loan?

The balloon payment on a hard money bridge loan is the final payment where the entire balance plus the final month of interest is due on the loan. With a 12-month bridge loan of $500,000 at 9.00% carrying a $3,750/mo payment, the balloon payment would be $503,750 ($500,000 principal balance + $3,750 monthly payment). Most hard money bridge loans are paid off prior to the balloon payment coming due either by a property sale or refinance. Some loans are extended prior to the balloon payment coming due. It is very rare to have a borrower write a check or wire funds from their account to satisfy the hard money balloon payment.

What is the maximum LTV on a cash-out hard money bridge loan?

The maximum LTV on a cash-out hard money bridge loan is 75% of appraised value. Only a few lenders will go to 75% for experienced real estate investors who have a clear exit strategy to pay off the loan. The majority of hard money lenders like to keep a ceiling on the LTV at 65-70%.

Fix & Flip Loans

How does hard money fix and flip financing work?

A hard money fix and flip financing loan works like any other non-traditional mortgage. The difference is that hard money fix and flip loans can be just a bridge loan or it can be a bridge loan + a rehab or construction component financing portion. Some house flippers like to use a hard money bridge loan to finance the acquisition as they’ll pay for renovations with their own funds. Other house flippers like to use the bridge loan to acquire the property and also like to finance the construction costs, allowing them to use higher overall leverage on their projects.

What are the interest rates on hard money fix and flip financing?

Interest rates on hard money fix and flip financing in California, Oregon, and Washington ranges from 7.50% to 16.00%. Some real estate investors use a large down payment of 50% or more and pay for construction costs out of pocket, thus, using lower interest rate pricing starting at 7.50%. Other investors finance 90% on the purchase and 100% of the rehab (90/100 fix and flip financing), therefore paying higher interest rates at 11.00% on the purchase and up to 16.00% on the rehab financing.

What are the closing costs on hard money fix and flip financing loans?

Closing costs on hard money fix and flip financing varies, ranging from the low end of 1 Point to the high end of 6 Points. First Capital Trust Deeds usually originates hard money fix and flip loans with point structure coming in at 2-4 points. Each loan has its own set of unique circumstances that determines the costs of hard money fix and flip financing loans.

How much of a down payment do I need to flip a house using a hard money loan?

Down payment requirements to flip a house using hard money financing vary depending on experience. For a first-time house flipper, a down payment of 20-30% of purchase price is to be expected. Experienced investors can borrow need 10-15% down payment on a hard money fix and flip loan.

How long is the term on a hard money fix and flip loan?

The term on a hard money fix and flip loan is usually written from 3-12 months. The majority of fix and flip lenders that First Capital Trust Deeds works with provide a 12-month term on their loans. In some cases, borrowers will request a shorter term if they have a cosmetic fixer, requiring minimal repairs and renovations. Some lenders provide pricing discounts on shorter-term loans where upfront points and the interest rate are slightly reduced.

Can I extend a hard money fix and flip loan?

Yes, hard money fix and flip loans can be extended past the initial 3-12 month term as long as the borrower has made on-time payments and can still qualify for the loan based upon a new application, financial documentation, and updated appraisal of the property, which may be halfway through the construction process. First Capital Trust Deeds extends several loans each month for their active investor clientele.

Do you offer 100% hard money financing?

Technically, we work with financing sources that offer 100% financing. But, it’s not very common as most hard money lenders want the borrower to have some “skin in the game” in the form of 10-20% down payment. For an experienced house flipper with 50+ successful projects under their belt buying a property 10-15% below AS-IS value, a hard money lender may do 90-100% financing on the purchase. It’s rare but not out of the question for the right borrower on the right house with the right lender.

How does the hard money construction reimbursement work on a fix and flip loan?

On a hard money fix and flip loan, construction reimbursement is pretty straight forward. The investor completes work on the property, submits invoices to the lender who verifies the invoices and that the work was completed. Upon review, the lender either pays the invoices directly to the subcontractors or will wire funds to the borrower to pay subcontractors.

What documents are required for a hard money rehab loan?

To qualify for a hard money rehab loan, the borrower will need to submit the following documents:

  • Loan Application
  • Financial Statements
  • List of previous successfully completed projects
  • Construction Budget with timeline for when construction draws will be issued
  • Building Plans (if making an addition to the property)
  • Contractor’s License & Insurance
  • Property Insurance info
  • Title Insurance info

Commercial Loans

Where can I get an agricultural hard money loan?

Some hard money lenders will issue loans on agricultural properties using either the appraised value of the land or the value of land plus value of crops. Mortgage brokers specializing in hard money loans would be the best resource to help find a hard money agricultural loan. They have knowledge of the limited number of hard money lenders originating agricultural loans.

What are the interest rates on hard money commercial loans?

Interest rates on hard money commercial loans range from 6.90% to 15.00%. Pricing always depends on borrower strength, loan term, property (type, value, use), etc. The lower the Loan-To-Value (LTV) and shorter the term (6-12 months), the lower the interest rate.

Do hard money lenders loan to assisted living facilities or senior care facilities?

Yes, hard money lenders issue loans to Assisted Living Facilities, or Senior Care Facilities. First Capital Trust Deeds has originated many loans for these properties, providing 12-24 month bridge loans along with construction financing for the owners of the property.

Do you originate hard money loans for gas stations?

Yes, FCTD originates hard money loans for gas stations, primarily in major markets on the west coast. Gas station hard money loans require a lot of documentation and usually take 30-45 days to close. However, for the operator of the gas station, the hard money loan can be the right solution to their current financing needs.

Do you provide hard money financing for hotels?

Yes, FCTD provides hard money financing for hotels and motels, known as hospitality loans. Borrowers need to provide updated Asset and Financial Statements, recent Star Reports, Franchise Agreements, and usually an Appraisal (some lenders do a walkthrough in lieu of a new appraisal). Loan-To-Value (LTV) leverage depends on property type, location, and sponsor strength.

Do you finance office buildings?

First Capital Trust Deeds finances office buildings, using both short-term hard money bridge loans of 6-24 months and longer-term permanent financing. FCTD has many funding sources for office building loans, ranging from individual trust deed investors, family offices, or mortgage investment funds.

Do you provide hard money loans for apartment buildings?

Yes, FCTD provides hard money loans for apartment buildings. The company has funded hard money bridge loans for the acquisition and provided construction reimbursement funds for investors doing a value-add renovation of the property before either selling or refinancing into a long-term institutional multi-family loan through Fannie Mae or Freddie Mac.

Do you finance mini-storage properties?

Yes, FCTD originates hard money loans for mini storage properties. The company has originated several loans for owners of mini storage facilities, providing the investors with very competitive 12-24 financing starting at 7.99%.

How do I finance an industrial warehouse building with a hard money loan?

To finance an industrial warehouse building with a hard money loan with attractive pricing, a property owner will need to complete a loan application, provide updated financials including taxes and asset statements, rent rolls (if applicable), environmental report, and appraisal report. If the borrower just needs a loan to close within a week, then FCTD will match the owner with a hard money lender that can move quickly without all the supporting documents in order to fund quickly.

Do you finance land and vacant lots?

Yes, FCTD does finance land and vacant lots using hard money loans. Many clients have used hard money loans to buy land for commercial development, with Loan-To-Value (LTV) up to 50% of appraised value (higher LTV with additional improved collateral (cross-collateralized or blanket loan). Others investor clients, including spec home builders, have bought vacant lots using hard money loans. For spec builders, FCTD usually finances the vacant lot at 30-40% LTV AND 100% of construction cost to build the home.

Can I get a hard money loan to acquire a subdivision?

Yes, FCTD provides hard money loans for subdivisions for experienced real estate investors in California, Oregon, and Washington. We have originated several hard money loans for subdivisions. Many developers use hard money financing to acquire land for a subdivision in order to speed up the process of completing the project. Generally, hard money lenders move faster through the underwriting process than banks when it comes to development and construction financing.

Second & Third Mortgages

What are the requirements for a hard money second mortgage?

To obtain a hard money second mortgage, we must determine if the loan will be for consumer purpose (owner occupied and second homes) or for business purpose (investment, rental, etc). If for consumer purpose, the borrower will need to complete the application, provide all income and asset documentation to show Ability To Repay (ATR) the loan. If for business purpose, the borrower will need to complete the application, provide rental agreement(s), rent rolls, and bank statements for the individual and borrowing entity. Both consumer and business purpose loans will require income verification, an appraisal, title insurance, and other standard loan requirements.

What are the interest rates for hard money second mortgages?

Interest rates for hard money second mortgages range from as low at 9.00% to a high of 16.99%. The interest rate depends on location, property type, use – business or consumer purpose, Loan-To-Value (LTV), availability of capital in the local market, etc. Hard money second mortgages are not as common as hard money first mortgages.

What are the requirements for a hard money business purpose HELOC?

To qualify for a hard money business purpose HELOC, a borrower will need to complete the application provide rental agreement(s), rent rolls, and bank statements for the individual and borrowing entity. The lender will review the borrower’s credit report, background check, order an appraisal and title insurance, and review existing liens on the property. First Capital Trust Deeds offers hard money business purpose HELOCs in California.

Ground Up & Construction Completion Loans

How can I obtain a hard money ground-up construction loan?

In order to obtain a hard money ground-up construction loan, a real estate investor will need to provide a loan application, income and asset documentation, entity documents (Articles of Organization, Operating Agreement, & EIN), documentation of previous experience, construction bids, general contractor license and insurance, plans, permits, list of comparable finished properties, copy of Deed on land, if currently owned, or copy of purchase agreement for land, and other required documents.

How can I qualify for a hard money construction completion loan?

To qualify for a hard money construction completion loan, a borrower needs to apply to both the lender and the title company for approval. The title insurer will make sure the borrower has the liquidity to protect from mechanic’s liens, which are a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property.

What lenders provide hard money ground-up construction loans?

Many lenders provide hard money ground-up construction loans. Lenders can be individuals, multiple individuals assembled by a mortgage broker who have invested in a construction Note, or a private mortgage investment fund that specializes in making construction loans to real estate investors.

Do hard money construction lenders allow the seller to carry back the land loan in second position?

If the borrower, or sponsor of the LLC, is strong enough financially and has experience building, many hard money construction lenders will allow the seller to carry back in second position a loan for the vacant lot or land. First Capital Trust Deeds has originated ground-up construction loans where borrowers needed to pay 100% of the cost of the loan while we provided financing for 100% of the construction. There have been other situations where the borrower put 50% down on the land, seller carried 50% behind the 100% construction loan. Seller carry on construction depends on experience, financial strength, seller willingness to carry a second, and construction lender allowing a junior lien.

What is dutch interest?

Dutch interest is an interest accruing technique used by lenders, including hard money lenders, in construction loans. Interest is accrued on the entire loan amount rather than the construction reimbursement advances paid out by the lender.

Rental Property Loans

How can I finance more than 10 residential properties?

A real estate investor can finance more than ten residential rental properties by either using hard money or Non-QM financing. Hard money lenders usually don’t limit the number of financed residential rental properties an investor owns like Fannie Mae and Freddie Mac, which have a maximum of 10 financed properties. Non-QM lenders have flexible guidelines. First Capital Trust Deeds recently used a Non-QM lender to close sixteen different 30-year fixed rate loans for a residential real estate investor that owned 40+ properties.

I own several rental properties. How can I finance more rental properties if my tax returns show a loss?

If you are showing annual paper losses on your tax returns due to real estate interest and depreciation, it would benefit you to look into Non-QM financing for your next acquisition. Non-QM loans on rental properties use market rent to determine income rather than using a borrower’s tax returns, which for investors with many properties, are bound to show losses. Non-QM loans are a great way to finance investment properties.

Do Non-QM lenders offer a 30-year fixed rate loan on residential properties?

Yes, Non-QM lenders offer 30-year fixed rate loans along with 5 & 7-year ARMs for residential rental properties. First Capital Trust Deeds has originated several dozen non-QM loans for residential real estate investors, many of who chose the 30-year fixed rate option to stabilize their long-term expenses on their properties.

Do you finance multi-family properties?

Yes, First Capital Trust Deeds finances multi-family properties, including 1-4 residential units up to large apartment buildings. FCTD originates several loans each month for investors purchasing and refinancing their multi-family properties, providing bridge loans and long-term financing up to 30-years for stabilized properties.

How do I obtain a mortgage for an Airbnb or VRBO vacation rental?

To obtain a mortgage for an Airbnb or VRBO vacation rental, an owner needs to complete a loan application, provide financial statements including tax returns and P&L on the subject property if it has been owned for more than a year. FCTD has attractive hard money financing bridge loans for 12-24 months, as well as 5, 7, and 30-year fixed rate options for Airbnb and VRBO vacation rental owners.

Can I obtain a hard money loan for a negative cash flow property?

Yes, you can obtain a hard money loan for a negative cash flow property? In fact, FCTD originates several hard money bridge loans each month for negative cash flow properties, which are underwritten primarily by the equity in the property versus the cash flow stream. Many investors use hard money financing during the period they are making improvements to the property in order to raise rents. Upon completion, FCTD will refinance the investor out of the hard money loan into long-term financing.

Do you finance non-warrantable condominiums?

Yes, FCTD provides hard money loans and Non-QM loans for investors acquiring non-warrantable condos. The company has originated several hard money loans for investors in California buying a large percentage of the condo units in a development.

Luxury Home Loans

Can I obtain a bridge loan for a completed luxury spec home listed on the market?

Yes, you can obtain a bridge loan for your completed luxury spec home listed on the market. First Capital Trust Deeds provides developers and builders with bridge loans on their completed luxury home projects with interest rates from 6.50% to 9.99%.

Can I obtain a bridge loan on a completed luxury condo development?

Yes, First Capital Trust Deeds originates private money loans for luxury condo developments. Pricing starts with interest rates from 6.50% to 9.99% up to 70% Loan-To-Value (LTV) with lien release carveouts when units in the building are sold.

Owner Occupied Loans

How long does it take to close an owner occupied hard money loan?

The amount of time that it takes to close an owner-occupied hard money loan is generally 25-30 calendar days. Many homeowners with significant equity in their homes, think they can obtain an owner-occupied loan in 7-10 days, like the way it used to be prior to 2008. However, hard money lenders originating owner occupied loans must follow state and federal consumer loan laws including, Ability-To-Repay (ATR), TILA, TRID, RESPA, etc. Adhering to lending laws takes 25-30 days to close an owner-occupied hard money loan, just like a conventional mortgage.

Do hard money lenders offer 30-year fixed rate owner occupied loans?

Yes, hard money lenders offer 30-year fixed rate loans, often on owner occupied properties in California, where mortgage capital is more abundant. The only reason hard money lenders offer 30-year fixed rate financing is to conform to consumer loan regulations. Hard money loans should be used as interim financing rather than a long-term solution.

Can I use a hard money loan to exercise a purchase option?

Yes, you can use a hard money loan to exercise a purchase option on a property. Some hard money lenders will base the value of the property on the option price while others will use current appraised value.

For Example:      
$400,000              Option Price signed two years ago.
$500,000              Appraised Value (current)

$400,000              New Loan (80% of Appraised Value)
$320,000              New Loan (80% of Option Price)

Do hard money lenders follow the Ability to Repay rule on owner occupied loans?

Yes, hard money lenders must adhere to the Ability To Repay (ATR) rule on owner occupied loans. Several homeowners with limited documentation and a large percentage of equity in their homes have requested that FCTD help them with an equity-based loan but it’s not possible since the ATR rule must be followed. In the case of homeowners seeking an equity-based owner occupied hard money loan, we recommend they ask friends and family (the people who love them!) to give them an unsecured personal loan.

Can I qualify for financing using my business bank statements?

Yes, many hard money lenders and Non-QM (Qualified Mortgage) lenders allow a self-employed borrower to qualify using deposits of business bank statements. When qualifying with business bank statements, underwriters usually calculate “personal income” as 50% of gross deposits. The business bank statement has been a great option for self-employed borrowers with excellent cash flow but who take appropriate write downs on personal income taxes.

Do you finance owner occupied non-warrantable condos?

Yes, FCTD can finance owner occupied non-warrantable condos in California, Oregon, and Washington. The maximum Loan-To-Value (LTV) with hard money is 70% of the lesser of appraised value / purchase price. The maximum LTV using a non-QM loan is 85-90% LTV with interest rates coming in around 7.00%.

Blanket Loans

How do I obtain a hard money blanket loan?

In order to obtain a hard money blanket loan, a person must have two or more properties to encumber with one mortgage. Blanket loans can be used for owner occupied residences and investment properties. First Capital Trust Deeds has structured numerous blanket loans for real estate investors to acquire properties and to pull money out of properties for new investment.

What is a cross-collateralized loan?

A cross-collateralized loan is the same as a blanket loan, where there are two or more properties used for one loan. Hard money lenders work with real estate investors to cross-collateralize properties to make a loan work for the investor.

How does a hard money blanket loan work?

A hard money blanket loan works when a borrower uses one loan against two or more properties. In some blanket loan scenarios, the borrower wants to close on a new property before selling their existing property. Real estate investors sometimes like to put 5-20 rental properties into a single loan with advantageous terms.

1031 Exchange

Do hard money lenders finance 1031 Exchanges?

Yes, hard money lenders finance 1031 Exchanges. First Capital Trust Deeds has originated numerous 1031 Exchanges for real estate investor clients over the years, working on simple and complex transactions. Hard money lenders are an excellent source of financing a 1031 Exchange as they have the flexibility to facilitate the interested parties and entities in an exchange.

Can I use a hard money loan to complete a Reverse 1031 Exchange?

Yes, you can use a hard money loan to close a Reverse 1031 Exchange. In a “reverse”, the investor buys a new property prior to selling their property, using the Qualified Intermediary (QI) (1031 Exchange company) to complete the transaction. The investor has 180 days to sell their property to successfully close out the exchange. First Capital Trust Deeds has financing available to execute a Reverse 1031 Exchange.

Can I use a hard money loan to complete a 1031 Improvement Exchange?

Yes, you can use a hard money loan to complete a 1031 Improvement Exchange. Hard money lenders are accustomed to working with real estate investors, Qualified Intermediaries (ie. The 1031 exchange company), and other interested parties. The hard money loan is used to complete the exchange and is in force until the improvements have been made and the borrower can refinance into more conventional financing.

Vesting

Can I obtain a hard money loan in the name of my LLC?

Yes, you can use an LLC to obtain a hard money loan. In fact, many of the loans FCTD originates each month are made to an LLC personally guaranteed by the sponsor. Vesting in an LLC is very common in real estate.

Do I need to personally guarantee a hard money loan if my LLC is the borrower?

Most of the time, hard money lenders require that an individual personally guarantee the loan they are taking out in the name of their LLC. There are times where a PG isn’t required or the lender does not want a PG on the loan. However, most loans FCTD originates have a Personal Guaranty.

Non-Qualified Mortgage Loans

What is a Non-Qualified Mortgage (Non-QM) loan?

Non-QM loans are loans that fall outside the Qualified Mortgage laws / requirements of lenders that sell to Fannie Mae and Freddie Mac or have FHA, VA, or USDA insure / guarantee the loans. Non-QM loans are originated by lenders who sell the loans to private investors like investment banks, hedge funds, and pension funds. Non-QM loans are the more disciplined descendants of what used to be known as “Alt-A loans” that were popular from 2002-2008. Meaning, Non-QM loans are better underwritten than the 2006-2008 vintage of Alt-A loans.

Who should use a Non-QM loan?

Self-employed borrowers and active real estate investors who have difficulty qualifying for conventional and bank jumbo financing should consider Non-QM loans. Non-QMs have greater flexibility when it comes to verifying income, which is valuable to self-employed borrower and real estate investors, who often show paper losses on personal income stemming from capital investment into and deprecation from real estate holdings.

First Capital Trust Deeds

Is First Capital Trust Deeds a lender or a broker?

First Capital Trust Deeds is both a lender and mortgage broker. The company is licensed as a broker in California and Washington and as a lender in Oregon. FCTD can originate business purpose private money and hard money loans in dozens of states that don’t require licensing.

In what states does First Capital Trust Deeds originate loans?

First Capital Trust Deeds originates the loans in the following states:

Consumer-Purpose Loans (Owner Occupied 1-4):
  • California
  • Oregon
  • Washington
Business-Purpose Loans:
  • California
  • Oregon
  • Washington
  • Colorado
  • Connecticut
  • Delaware
  • DC – District of Columbia
  • Florida
  • Georgia
  • Hawaii
  • Illinois
  • Maine
  • Maryland
  • Massachusetts
  • New Hampshire
  • New York
  • Ohio
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Tennessee
  • Texas
  • Virginia
  • West Virginia
  • Wisconsin
  • Wyoming

What kind of hard money loans do you originate in California?

In California, First Capital Trust Deeds originates business and consumer purpose loans. Business purpose loans include bridge, fix and flip, commercial, construction, second mortgages, and rental property loans. Consumer purpose loans include owner occupied residential and second mortgages.

What kinds of hard money loans do you originate in Oregon?

FCTD originates business purpose and consumer purpose loans in Oregon under the dba of First Capital Funding, Inc. Business purpose loans include bridge, fix and flip, commercial, construction, and rental property loans. Consumer purpose loans are owner occupied properties and second homes.

What kind of hard money loans do you originate in Washington?

FCTD originates business purpose and consumer purpose loans in Washington under the dba of First Capital Funding. Business purpose loans include bridge, fix and flip, commercial, construction, and rental property loans. Consumer purpose loans are owner occupied properties and second homes.

Why should a borrower work with a hard money mortgage lender?

A borrower should work with a hard money mortgage broker because a broker, like First Capital Trust Deeds, can save a real estate investor a lot of time, money, and headache by matching the investor’s project with the best funding source. Mortgage brokers specializing in hard money loans can quickly match an investor’s financing requirements with the lender that matches those requirements. A broker’s knowledge and expertise allows investors to spend more time on their projects than navigating the financing world.

The most common reason borrowers give for working with First Capital Trust Deeds as their mortgage broker is the access to capital for their projects. FCTD has a large network of individual trust deed investors, family offices, and mortgage funds, each of which have a specific risk tolerance. Some lenders will give lower rates (7.50% to 9.00%) for lower leverage loans while other lenders want a higher yield on their money (10.00% to 13.00%) and will issue loans that meet their goals. FCTD is highly skilled at quickly matching borrowers with lenders.

Where do I find a hard money loan?

A person could find a hard money loan by doing a Google search. However, this might be harder than expected because each hard money lender has a specific niche they lend to. Some lenders only do fix and flip financing up to 70% Loan-To-Value (LTV) in California while others will only do commercial loans in Oregon up to 55% LTV. Some lenders advertise bridge loans to 80% LTV but right before close of escrow reduce the LTV to 70-75. While others do 90% purchase and 100% rehab on flips but charge 12-16% rates.

To save time and money, contact First Capital Trust Deeds. We are a specialty hard money mortgage broker licensed in California, Oregon, and Washington. Within 5 minutes, we’ll know which lender could do your loan. And within that same 5 minutes, if a lender doesn’t exist to fund your loan, we’ll let you know so and recommend other financing resources.

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