Frequently Asked Questions
How do you define "Private Investor or Hard Money?"
"Hard Money" loans or "equity loans" as they are sometimes called refer to non-conventional real estate loans. They are usually funded by private money sources and investors and not banks, pension funds, etc. Interest rates and points on such loans are usually higher. Terms usually range from 4 to 6 months. Hard Money loans have one basic requirement. There has to be some substantial equity in the property to give the lender a reason to invest their funds in an otherwise risky venture.
So, why would you utilize a hard money lender? There are many reasons why business owners and real estate investors use private finance (hard money) as their prefered financing vehicle. Thpically the property to be purchased might be presently vacant and in need of repairs. It may be an older property in a failing neighborhood which has the potential for revitalization. It may be a foreclosure and can be purchased on a short sale. Or you may just need a quick closing to secure a property before you find an investor/rehabber to which you want to flip the property. Or you may want to purchase a run down piece of property, rehab the property, and refinance it for rental income. In all these cases, you would need a hard money loan because conventional financing is just not an option or it would take too long to secure. "Hard Money" is just a cost of doing business and an effective method of doing business as a real estate investor.
Do I need good credit to get approved for a loan?
Our approval is based upon a variety of factors including your credit score, funds available, and the value of the property you want financed. We look at your credit to get a feel for who is borrowing the money in order to rule out people who obviously never intend to pay anyone. But, we also look at the value of the property after it is repaired, the price you are paying for the property and the cost of repairs. We look for ways to finance your investment, not for ways to turn you down.
How long does it take to get approved for a loan?
Generally within 24 hours after you have submitted your loan application and documentation, we will issue our committment.
How long does it take to close the loan once I have been approved?
After your submitted property has been approved, it normally takes around seven business days. Once we have copy of the title work, and have evaluated the real estate, we will close quickly.
Should I have an investment property under contract before I fill out the loan application form?
Our process is two-fold: first we approve the applicant, then we approve the property you are interested in financing. Most of the time our clients complete both at the same time
What is the term of the loan?
We write 4 month loans and can extend these loans for up to 12 months depending on your needs. But, the object of a hard money loan is to either turn the property quickly or have it rehabbed and refinanced with a conventional lender. Since we do not have any prepayment penalties, you may prepay the loan anytime you wish prior to the term of the loan.
Do I have to fill out the loan application form each time I submit a new investment property for financing?
If it has been less than one year since you were approved for a loan with us, we do not require another loan application. Periodically, however, we will ask you to update your financial information for our records.
Do you pull my credit report each time I request a loan?
We will obtain your credit report when you submit your original loan application to us. After that, we will periodically review your credit as our business partnership continues.
What is the interest rate charged?
We try to keep our programs simple. Our interest rate varies and varies depending on criteria that includes borrower experience and liquidity, loan to value, credit score, and the current prime rate. Generally we charge 1.5% interest a month
What "Loan to Value" (LTV) are you looking for?
We generally look to lend on properties with loan to value's less than 75%. Ocassionaly we will go higher, based on individual circumstances
Can I get repair money to rehab my investment?
You most certainly can. We fund all your repairs up to what the LTV will allow. We do require you to complete a detailed, itemized repair list of the repair work. An escrow draw schedule identifies the order in which the repairs should be made. After a certain percentage of the repairs have been completed and verified, the monies are withdrawn from your escrow account and forwarded to you.
How many investment properties can I finance at one time?
Our policy is to start with one property until we have an established business relationship with you. As you become more experienced and have successfully completed a few loans with us, we can look at funding multiple properties as they are identified.
Do I need to get an appraisal?
Upon acceptance to the program, we will do our own evaluation of the property that you are lookign to finance. On larger requests, some rehab, or higher ltv's we may hire an outside appraiser to get a second oppinion ot he property's value. This need if necissary will be detailed out int he committment letter
How does the escrow draw procedure work?
Each draw request will require an inspection to ensure that the work is completed in a thorough and professional manner. After completing a certain percentage of the required work, you will fill out a "Draw Request Form" and forward this to Benchmark. We will schedule an inspector to visit your property and authorize the release of your escrow funds.
How much of my own money do I need to put in the deal?
Points may be rolled into the loan subject to meeting our standard loan to value and credit criteria. You will need to make sure you have money in reserve to pay the monthly payments during the term of the loan.
How is interest handled?
Typically we will collect the interest for the loan at closing, the money is held in escrow and applied to each monthly payment. Ocassionally with the right loan to value we are able to add the interest carry to the loan amount
Do you require a survey?
Sometimes. We will need the title company to issue a mortgage policy coverying the property, They occasionally will require a new survey to issue this policy.
Do you make loans on rental property?
Yes, we do loans on rental property. It is usually when the property needs to be rehabbed prior to being rentable.