Borrowers who want to avoid the hassle of dealing directly with a private hard money lender for getting financing on real estate properties may opt to work with mortgage brokers. A competent broker with experience and good contacts can save the borrower a great deal of anxiety and frustration before getting the loan approved. A wholesale hard money lender with a large offering of loan programs in many geographic areas generally have hard money brokers that aid them in increasing loan origination volumes.
Wholesale Lending Vs. Direct Lending
Banks and conventional mortgage lenders usually have a wholesale lending channel that originates commercial and residential real estate loans through a network of brokers. The interest rates offered on the wholesale loans are very competitive, so brokers typically offer a rate that allows them to make YSP (yield Spread Premium) or charge closing fees. The marketing costs involved in generating new business are substantial for lenders with no wholesale offerings. By signing up a large network of mortgage brokers and distributing their various loan programs through them, a wholesale hard money lender can expect to save a significant amount of time and money.
When a broker initiates a loan process, he starts off by taking the basic information related to borrower’s assets, income, credit history and employment history. Depending on the wholesale lender’s lending guidelines, other essential documents also may also be needed before submitting the full loan package to the lender’s underwriters. The underwriter reviews the submitted information based on the supporting documentation provided and may issue new set of conditions in order to finalize the loan terms and close the loan.
Hard Money Mortgage Brokers
A borrower, who needs to have quick access to funds while presenting limited documentation, can approach a hard money broker who works with wholesale private investors. The broker will do a thorough analysis of all the information given to him by the borrower seeking a hard money loan. After the analysis, the broker will sort through various hard money lending programs offered by wholesale lenders and narrow them down to a few suitable options to begin the loan approval process. The broker might not charge any fees for loan origination or add extra closing costs as they may be sufficiently compensated by the lender, especially if the lender make wholesale loans.
Wholesale Hard Money Underwriting Guidelines
The guidelines on wholesale hard money loans can vary quite a lot from lender to lender. The one consistent factor that affects the successful closing on a private money loan is the equity and the value of the collateral on which loan is to be made. Since all hard money lending is asset-based, the other factors considered to significant by other conventional lenders such as credit scores, documentable income and assets are often overlooked, or at least not given the same weight, in lending decision making by wholesale hard money lenders.
In case bridge loans (short-term commercial loans), lenders also expect the borrower to present them with a clear business plan outlining the repayment plan or strategy. The length of the loan term on a wholesale hard money loan commonly falls under 24 months. At or before the end of the loan term, the property owner must either sell off his property or refinance to a permanent loan in order to pay off the outstanding private investor loan. The interest rates charged by hard money lenders can range from 8 -20% depending on the borrower and property profile. The prior experience of the borrower in completing similar projects also heavily influences the lender’s approval or disapproval decision.
Properties or other assets that can offer equity cushion to protect the hard money loan amount get quick financing. Commercial and residential properties are the most common asset-classes generally offered as collateral on a wholesale hard money loan. Your mortgage broker can assist you in making an evaluation of the property’s value and then submit the lender who offers the best prospect of approving the loan.
Get a Wholesale Hard Money Loan
A search on the web will turn up a mass of lenders offering hard money loans. Understanding each lender’s specific requirements and then packaging the loan items to suit the lender’s underwriting procedures is difficult, even for the most seasoned borrowers. A borrower who finds the hard money loan process extremely daunting should instead approach a broker who can efficiently and effectively manage the loan approval process. This way the broker can direct the borrower through any road blocks or pitfalls along the way.
By working with a broker with right experience and contacts, a wholesale hard money loan can be obtained much less effort and strain, while also costing less. A comprehensive list of wholesale hard money lenders who work with brokers along with their profiles, lending guidelines can be found in our hard money directory.