Hard Money Loan
carefully to learn information you need to know before applying for a
California hard money loan.
happens to California's economy creates a significant impact because it
is, after all, the 7th largest economy in the world. The
effects of the current housing crisis has extended to every corner and
every neighborhood of the Golden State.
It is true that banks
and traditional lending institutions have practically cut off the flow
of money to borrowers, regardless of their qualifications or credit
rating. This has forced borrowers to turn to independent
companies, also known as hard money lenders, who have been filling the
gap since the credit tightening started in 2007.
California hard money loan is provided by high net worth individuals,
pension funds, hedge funds, and individual retirement accounts, looking
for real estate-backed investment opportunities. They fund
commercial and residential real estate purchases and refinancing.
Things to Know before you
apply for a California Hard Money Loan
Your California Mortgage Loan Disclosures
are required by both Federal and California state laws to disclose
specific information about their mortgage loan.
disclosures are meant to inform the borrower and allow them to compare
rates and terms from other lenders. Most of these disclosures
presented to the borrower within 3 business days from the time they
applied for the loan. The disclosures may be sent via regular mail,
fax, e-mail, or presented in person.
Faith Estimate (GFE) - Based on RESPA
(Real Estate Settlement and Procedures Act) law, lenders must supply borrowers of
a California hard money loan
with a GFE of their loan's closing costs. The GFE includes an
itemization of settlement fees and charges including:
discount points, broker's commission, title and escrow fees, processing
and administration fees, recording fees, credit report fees, and
appraisal fees. HUD has issued a revised version of the GFE as of
January 1, 2010 with the intent to help borrowers cut down on loan
The idea is that the GFE
should be sent to the borrower ahead of the loan, and while the
borrower is still doing their "comparison shopping". The
originator typically provides one GFE to the borrower right after the
loan application is taken, then the lender provides a second one that
has more accurate figures.
also states the date that the loan offer expires to give the borrower a
certain amount of time to be able to lock in the interest rate.
buyer and seller will receive a final HUD-1 form (also referred to as
the final settlement statement) at the close of escrow. This
document itemizes the final closing costs and fees for the loan.
- The TIL states the Annual Percentage
Rate (APR). The APR calculation gives borrowers a chance to see
exactly how much the loan will cost over the life of the loan, once you
include prepaid finance charges like private mortgage insurance,
processing fees, origination points, etc.The APR tells borrowers the true costs of the loan, expressed as an
annual percentage rate that includes the interest rate + prepaid
In addition, the TIL also states whether there is a prepayment penalty
for the loan, any details on late payment penalties, as well as the
loan's payment schedule.
can compare each loan offer as "apples to apples" by comparing the APR.
One loan may have a lower interest rate, but when you add in the
prepaid finance charges, the APR may be higher than a loan with a
higher interest rate, but lower prepaid finance charges. The APR
can tell borrowers if they're getting a good deal or not. IMPORTANT to NOTE: Hard Money Loan APR's
- The APR for a California hard money loan (as well as any other type
of hard money loans) will be very high because of the high costs and
fees. Many people are shocked to see that their hard money loan
APR is 18% when the interest rate is only 10%, which is entirely
possible.LEGAL Significance of the TIL
- Any errors in the TIL may give borrowers an extension of 3 years to
rescind the loan (right of rescission). The TILA has become a hot
target for forensic audits of loan documents for those seeking a mortgage loan modification.
as you can see, the benefit of the GFE and the TIL is to give you the
ability to compare the costs of each loan offer from different
lenders and/or brokers. However, keep in mind that all California
hard money loan products have many additional terms that need to be
taken into consideration, so scrutinize the the offers carefully to see
which one is best suited to your situation.