Texas Hard Money Lending: What Will Your Lender Require?

Looking for some quick financing for a real estate transaction? If you’re in Texas, hard money lending might be something that you want to consider. This type of financing, like hard money bridge lenders offer, can be faster to process. It can make it easier to get the financing you need in the time frame that you need it. 

Conventional financing can take 3 to 4 months before you are able to close. Hard money lenders can close a real estate transaction in as few as 10 days, other types of loans even faster. Now, before you “bank” (note how we managed to slide that expression in there?) on that, there are some points we need to make clear. 

If you want a fast, smooth transaction, make sure that you have all the paperwork ready to go that hard money lenders near you will ask for. It’s this information that will ensure a smooth and easy loan process.

 Hard Money Lending Application

A hard money lending application process is cleaner than you might have experienced in applying for other mortgages. There’s less documentation and paperwork in general. However, everything that is required is critical. You want to make sure that it’s provided as quickly as possible and supports your loan request.

Hard Money Lenders Documentation

For residential hard money loans, there is a set of documentation that most lenders are going to ask for. In addition to these basic items, each lender might have specific requirements. Those requirements could be specific to the company or the property being financed. This list will include at a minimum:

Photos of the Property

Exterior and interior shots are needed. Don’t forget to take photos of items and areas that will be renovated or replaced as well. Any photos that help the lender understand the property as well as what you are planning to do should be included. Documentation is key to a successful loan process! Video also works for some lenders.

Repair Estimates

Anything and everything that’s going to be repaired or replaced needs a written estimate from a contractor. Even if you are doing some of the work, get a third party estimate for each of those items to include in your loan package. Make sure that the estimates are detailed and clear about the scope of work the contractor will do.

Are you looking for hard money construction loans?  The documentation needed for those is likely to be more extensive than a home that needs repairs. Speak with your lender about other requirements and documentation for this loan type.

Contract to Purchase

Include a copy of the signed contract that has been agreed to by all parties. If the contract isn’t ratified yet, still include the contract that you plan on completing. Outline all of the terms and conditions as well as any title company or escrow instructions that are important to note.

Insurance Quote

Make sure that you’ve contacted your insurance company for a quote on the property you are looking to finance. Provide that quote or policy, if it’s in place, in your documentation to the lender.

Prelim Title Report

If you have documentation or a “preliminary” title report showing that title is clean for the subject property, you might want to include that as well. Your lender will have their own title companies that they work with when it comes time for the loan closing. But documentation showing that there are no title issues is helpful.

On top of these key items, each lender will have other requirements. It might be more personal documentation needed from you. Or, it could be further requirements or documentation needed for the property. The critical point is that whatever the requirements, deliver them as quickly as possible to the lender.

Now that we’ve covered the basics of the paperwork, what else would a hard money lender near you require?

To start with, it’s likely that the lender will ask to be in the “first lien” position. That means that this lender’s loan takes precedence over any other debt on the property. And, in the event of default or foreclosure, they would be repaid first from any proceeds from the sale of the property.

When it comes to how much you can borrow, that is usually based on several factors. In general, lenders will only lend 65-75% of the current appraised value of the property. Some lenders are willing to lend based on the ARV, or “after repairs value”. In that instance, lenders estimate the value of the property upon completion of all the work. They could do that internally or with an appraisal.  The after repairs value then becomes the basis for the loan to value percentage. The lender will calculate the loan amount using the ARV value rather than the current value before repairs.

Most Texas hard money lenders near you want to make sure that you have substantial equity in the property before approving a loan. You can expect that your lender will want to see 30-40% equity coming from you in a transaction. If the funds aren’t coming from you but from other sources, that can impact the approval process.

Texas hard money lending can be the perfect fit for your current or next project. With quick turnarounds and less paperwork than traditional financing, you won’t have to worry about losing that next deal! Learning the basic of what it takes to get a hard money loan will make it easier and faster for you in the future. By following these guidelines, you will have a smoother loan process!

If you are looking for up to 75% hard money lending in Texas, we can help! Click HERE to email us instantly or you can call us right now and get started – 512-220-9916

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