Every month it seems we receive a call for a 12-month private money bridge loan from a realtor whose buyers had their mortgage application denied less than one week before the scheduled close of escrow. That was the case with this 12-month private money bridge loan in Studio City that closed in less than a week.
The self-employed buyers were incredibly strong loan applicants. But, they were self-employed, which in today’s mortgage market, makes things more complicated when it comes to obtaining a jumbo loan. Lenders prefer the steady paycheck and simple tax returns of a wage earning loan applicant. Self-employed borrowers often have inconsistent cash flows and large tax deductions that lowers their adjusted gross income (AGI), which can be great for tax liability purposes but creates additional hurdles to overcome when applying for a mortgage.
In the world of private money lending, we’re more concerned about the property and location, the protective equity, and the strength of the borrower. In this situation, the property was beautiful and in a well-established part of Studio City. There was over $250,000 (or 25%) of protective equity from loan amount to sales price. And the borrowers clearly had the ability to refinance the loan within 2-3 months, after filing their income taxes showing higher income than the year before. This loan for $800,000 at 75% LTV was a no-brainer for the trust deed investor who lived less than ten miles away and had made a few loans in that neighborhood over the years.
Our expectation, along with the trust deed investor, is that the borrowers would refinance into a jumbo bank loan within the next few months. Superior borrowers don’t stay in private money loans longer than they have to and that is the expectation with this loan.
Private Money Financing Terms:
- $800,000 Loan Amount (75% LTV)
- 12-Month Term
- No Prepayment Penalty