Money Lender Loans is a private money lending company that serves individuals and businesses in Orange County. We are a direct lender that offers competitive rates and fees, fast approvals and closings with minimal paperwork. Our business lends hard money loans for all types of property.
Who are Hard Money Lenders?
Hard or Private money lenders are non-institutional lenders that offer people with short-term loans for property purchasing, investing, or renovation. These lenders range from an individual lender or an established money lending company. Their loans are available to long-term investors, short-term fix-and-flippers, cash-out refinancing as well as quick funding. The borrowers of these loans are usually required by the lender to provide a real estate asset as security for the money borrowed. These loans can be used to purchase a multifamily building, a condo, or a house. Depending on how the lenders operate as well as the way they relate with the borrowers, the private lenders can be categorized in the following three categories primary circle comprising of friends and family members, secondary circle which may consist of workmates, personal and professional acquaintances as well third-party circle which may include of private investors and private money lenders. Hard money lenders are one the most reliable for many borrowers because they provide professional services and have standardized loan terms, costs, loan fees, as well as interest rates. The following are the categories of borrowers to whom the hard money lenders serve:
- Borrowers who seek to buy, refurbish, and sell a property in one year
- Buy-and-hold investors seeking to buy a property and refurbish before refinancing it with a conventional mortgage
- Long-term and short-term investors seeking quick refinancing
- Long-term investors seeking to season a property
- Long –term investors with no qualifications for conventional mortgages, a 203(K) loan or a HomeStyle renovation mortgage but are planning to refinance when they qualify
What are Fix and Flip Loans?
Fix and Flip Loans are also called investment property rehab loans, house flipping loans, or hard money rehab loans. These are short term loans that enable investors in real estate to purchase refurbish and resell a property at a profit. Traditional financial institutions, such as banks and credit unions, may not offer these types of loans. However, private money lenders provide these loans to real estate investors. The process of obtaining an investment property rehab loan from private money lenders are quicker and simpler as compared to the loan process by banks. Property rehab loans mostly have low eligibility criteria than conventional loans.
These loans ordinarily do not attract the prepayment penalty, allowing you to mitigate overall costs for financing the loan by making early installments.
Who is Eligible for House Flipping Loans?
Property rehab loans allow accomplished house flippers to undertake their own restoration of investment properties while allowing beginner flippers to engage licensed contractors for the same. The expertise notwithstanding, funding of a property rehab loan takes place in as little as two weeks. Property rehab hard money loans are therefore ideal for beginner investors who have contracted a licensed builder or contractor, accomplished house flippers with some past experience on rehab projects, and house flippers who would like to compete in the real estate market with cash buyers.
What are the Different Types of Fix and Flip Loans?
These loans exist in different types. Each type works for a specific group of investors. The following are the six common types of these loans:
- Hand Money Loans- Best serves the novice investors planning to trade with a contractor or investor who has done more than two flips.
- Bridge Loan- For investors planning to a quick closing and intending to get other financing afterward
- Cash-Out Refinance Loan – For investors who already have an investment property which has at least equity of 40%
- Permanent Bank Loan or Online Mortgage-Works for buy and hold real estate buyers planning to buy a property and flip it over five or more years.
- Investment Property Line- This works best for investors who have a rental residence with equity and are planning to cash out for further purchases.
- Home Equity Line of Credit- (HELOCs) Works for investors who have a primary residence occupied by the owner and have home equity of 30% or above.
Fix and Flip Bridge Loans
This is a temporary loan in which investors use to cover the time between two transactions for real estate. An investor can use this loan for purchasing one property as they wait to sell another property. Unlike hard money loans, this loan cannot be used to finance repairs. An investor can come across a great deal that may not be available by the time they expect to have the finances to buy it. Such investors can opt for this loan for buying the property before they can refinance it or flip it to repay the loan.
Characteristics of Bridge Fix and Flip Loans
- The loan can be offered at up to 70% (LTV)
- The interest rate may range between 6.2% and 9%
- The lender's fee or the origination fee may be 1% to 2% while the appraisal fee may be up to $500
- The loan term may run between two weeks and one year
- The loan can be approved within fifteen days and above
- The borrower typically needs to be able to have the ability to pay two mortgages to qualify for the loan and have 20% and above equity for the property and make an undisputable exit strategy to the lender in either a refinance or sale.
Fix and Flip Private Money Loans
The lenders in these loans require borrowers to provide the real estate property as security for the loan. The borrower may use the loans to buy, repair, and resell the property within one year. These loans do not involve complex qualification requirements and have a short approval period. The investors also prefer these loans since they can finance a property with an inferior condition. The borrowers do not require having an excellent credit history to get the loan. The concern of the lenders is based on the potential value of the property rather than the history of the borrower.
Determining the Value of the Loan
To determine the amount of loan an investor gets, the lenders count either the loan-to-property value (LTV) percentage of the property or the after-rehab-value (ARV) of the property. The LTV ratio is therefore based on the percentage of the property's initial price while the ARV ratio is based on the expected rate of the property after it refurbishing it. House flipping private money loans may be offered at up to 80% ARV and 90% LTV.
Features of Private Money House Flipping Loans
- These loans can be offered at an interest rate of between 7% and 12%.
- The approval time takes up to 24 hours while the funding is done within 10 to 15 days.
- The loan term may be as long as 1year to 3 years.
- Borrowers should have a credit score of not less than 550, have completed two or three previous flips and have help from a licensed contractor and 35% to 45% of the ratio of debt to income.
- The lender fee ranges between 1.5% and 10% while closing costs range between 2% and 5%.
Fix and Flip HELOCs
Home Equity Line of Credit is offered to the investors who own a primary residence. It works more similar to a credit card. Just like it is the case with credit cards, the lenders charge interest only on the borrowed amount until it is repaid. The investors can also take HELOC besides an already existing equity. The investors are also not restricted to how they use the capital. These loans are therefore not offered for investment properties. These loans do not exceed 85% of the combined ratio of loan-to-value (CLTV). The investors can use the loans to buy an investment property once they get the loan. The investors may use HELOC to buy and refurbish an investment or use the loan as part of the payment for a private money loan.
Flippers can be approved for this HELOC while seeking an opportunity since it is not a loan. The interest rates start occurring after making a real draw. The house flippers can, therefore, set a budget as they wait for an appropriate opportunity.
Characteristics of HELOCs
The HELOC is offered in an overall term of up to 25-30 years. This term is divided into two phases: the draw phase and the repayment phase. The draw phase takes the first 5-10 years while the repayment phase takes the remaining 20 years.
The borrowers are expected to have a credit score of not less than 640, 45% of the ratio of debt to income and a minimum of 30% of the existing equity.
HELOC can be approved within 30 to 45 days. The interest rates range between 4.5% and 5.5% with an origination fee of 2%. For the repayment, in the first 5-10 years, one pays interest only on a monthly basis while the remaining years, one pays principle and the interest.
Fix and Flip Cash-Out Refinance
In this kind of loan, the investor finances the buying of a property through refinancing an already existing property. A house flipping investor is, therefore, able to obtain equity from already existing property investment through giving a new loan and paying off the active mortgage using the loan. This new loan is referred to as the first lien. The investor is required to pay the existing loans before extracting any equity. The difference in amount between the loan issued and the previous mortgage can be used by the investor to pay for the other investments. The investor is restricted on how they spend the cash they receive through this type of loan.
Characteristics of Fix and Flip Cash-Out Refinance
- The available financing may amount 75% LTV ratio.
- This loan has as long terms as up to 10 to 15 years.
- The interest rate goes up to between 3.9% and 6%
- The loan is approved and funded within 30 to 45 days.
- The fees for these loans include up to 3% origination fee and two to five percent closing costs.
For one to qualify for this loan, they need to have a credit score of not less than 650, a maximum of 45% of the ratio of debt to income, cash reserves of up to six months, and 40% equity of the existing property.
Online Mortgage and Permanent Bank Loan
These loans take a term of 15 to 30 years. The investors use these loans for purchasing a long term primary residence occupied by the owner or properties not occupied by the owner for investment. These loans are mostly used by investors known as buy-and-hold investors. House flipping borrowers may also use these loans since it is convenient and beneficial for properties that they need to repair, properties that do not need a lot of repairs or property they need to improve and later on flip. This is because of the only finances properties in good condition.
Characteristics of Fix and Flip Online Mortgage and Permanent Bank Loan
- This loan is usually approved within 10 to 15 days and has lower interest rates as well as origination fees as compared to most of the other house flipping loans. The interest rates range between 4.5% and 6.6% and the origination fee of 0% to 1%. The closing costs for this loan is between 2% and 5%. The borrowers need to have a credit score that is not less than 640, and 45% of the ratio of debt to income.
Fix and Flip Investment Property Line of Credit
This is a credit line that works similarly as the HELOC. The only difference with it is that it is specifically purposed to finance investment properties. The investor pays interest for the money they use just as credit cards work. The investors can use this line of credit for short-lived financial needs for the purchasing or renovation of properties. This line of credit is only offered for investment properties not occupied by the owner. One can, however, get a line of credit for a portfolio investment property or a single investment property. Once funded, the investor may decide to use the money on whatever they want.
Characteristics of Fix and Flip Investment Property Credit Line
The available amount may be raised up75% of the loan to property value ratio. The approval time for this line of credit may take 30 days, with an interest rate of 5.2% to 8%. The line of credit has a service fee of $ 75 annually, and 1% to 5% closing cost. Applicants for this line of credit need to meet some requirements. Besides, their property must as well meet some criteria. This line of credit’s qualifications are a bit strict and focus more on the overall standing of the borrower. The following are some of the requirements for this credit line:
- A credit score not less than 640 and above
- 45 % of the ratio of debt to income
- 30% and above of the existing equity
- The property has 1-5 units or is a single family home
What are the Mistakes to Avoid When Dealing with House Flipping Loans?
These types of loans have gained great popularity in California in recent days. Real estate investors have been using these loans to acquire massive profits by using the loans to buy, repair, and resell the properties at a profit. However, if not careful, the investor may end up making great losses when they make mistakes. To avoid such losses, there are five common mistakes that every investor must avoid while processing these loans. These mistakes are as follows:
- The investor should avoid overdoing the improvement of the property to the extent that is too much for the neighborhood.
- The investor should avoid underestimating the predicted time for completing a construction project.
- Avoid taking up a project when you have insufficient funds or when you do not have enough contingency money.
- An investor should not overestimate the flipped house after rehab value.
- Investors should ensure that they have the right experience for completing construction before taking it.
Finding Fix and Flip Loans Near Me
House flipping loans remain to be one of the most popular types of loans used by real estate investors in California. As a result, knowing about these loans and being able to acquire them is one of the ways you can maximize your profits and remain relevant in this competitive field as an investor. At Money Lender Loans, we aim at providing investors in Orange County, with professional financial solutions for their needs. Our experts can evaluate your financial position and help you choose the most appropriate loan option. If you need a Fix and Flip Loan, do not hesitate to contact us. Call us at 949-409-4372 today.