Navigating the financial avenues of fix and flip real estate in California, hard money loans emerge as a significant asset, offering swift and adaptable financing solutions. This article sheds light on the role of credit checks in the hard money lending process, particularly under the policies of HCS Equity, a seasoned hard money lender in California.
Understanding Hard Money Loans
Hard money loans are typically secured by real estate and are distinguished by their reliance on the property’s value rather than the borrower’s creditworthiness. These loans are ideal for renovations or bridging finance needs where quick capital is essential. In addition, the focus shifts from the borrower’s financial history to the value of the property and the viability of the project.
Credit and Income in Hard Money Lending
With hard money lending, traditional financing metrics such as credit scores and income history often take a backseat. Instead, lenders typically focus more on the specifics of the real estate project at hand. The key considerations include the projected sale price after rehabilitation, the associated construction costs, and the availability of funds needed to complete the project. This project-centered approach allows lenders to effectively manage and mitigate risks associated with real estate remodels, leveraging their expertise to offer a product that suits your needs.
Collateral and Loan-to-Value Considerations
Hard money lenders allow for innovative financing solutions like cross-collateralizing with another property that holds substantial equity. This flexibility is particularly beneficial for investors who might not want to liquidate other assets for a down payment. Moreover, loans are not based on the purchase price but on the real, current market value of the property, ensuring fair leveraging regardless of the acquisition cost.
Investor Commitment and Requirements
Investors looking to engage with hard money lenders need to demonstrate commitment. A minimum of 35% down payment is usually required, along with proof of funds for any rehabilitation costs. This requirement underlines the importance of substantial investor equity, ensuring both the lender and borrower have vested interests in the project’s success.
Handling Properties with Complex Issues
Hard money lenders are proficient in handling properties with potential red flags such as pending city or county permits and building code violations. Their deep understanding of these issues allows them to proceed with loans that other lenders might avoid, providing a crucial service for real estate projects requiring extensive renovations or facing regulatory challenges.
HCS Equity provides a nuanced, project-focused approach to hard money lending in California. By prioritizing the project’s viability and value over traditional credit assessments, we offer a lifeline to investors who might otherwise struggle to secure financing due to credit constraints.
If you’re a seasoned investor or need financing for a rehab project that doesn’t fit the mold of traditional banking criteria, reach out to HCS Equity to discuss your hard money loan.
