Hard Money Loans in California

Applying for a commercial hard money loan is pretty straightforward. Here is a sample process:

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1. Contact me over the phone. You can reach me at 415-793-3403. You can also send an email at Kevin@rykercapital.com, so you can schedule an initial consultation.

2. Pre-Qualification: Before the loan process actually begins, and is usually the first step after initial contact is made. In a pre-qualification, the lender gathers information about the borrower and property being used as collateral for the loan. The property itself is typically the single most important factor when determining whether or not to move forward in the loan process. Other factors, to a lesser degree, include borrower credit and financial stability.

3. Filling Out a Loan Application: This is where the application really starts. For some other types of loans, the application takes place a day or two after your pre-qualification. For commercial hard money loans, the application takes place on the same day. The lender will ask you for authorization to check your credit rating (in case it’s required), a letter of explanation stating the purpose of the loan, and bank statements or financial statements as proof of affordability. The lender is required to give you a Good Faith Estimate (GFE). The GFE estimates the loan costs, and it’s required to be given to you no later than three days after your application. Also, a Truth in Lending (TIL) statement must be given to you by the lender. This is a disclosure of the loan’s terms and the interest rate charged for the loan.

4. Processing: Once the application is finished, your loan will begin processing. If it’s required, your credit report will be ordered, and the appraisal on the property that will be used as collateral for the loan is completed. This information — along with verification of employment, income, and assets — will be used to determine if you qualify for the loan. After collecting all requirements, the processor will then submit all the documents to the underwriter for review.

5. Underwriting: The underwriter assesses whether the risk of lending to you is acceptable. They will review all of the documentation collected by the processor and determine whether or not to approve your loan. If it’s approved, they will also determine what interest rate you qualify for as well as the terms of your loan.
   There are three Cs’ that an underwriter will analyze:

   1. Credit: Your score, history of on-time payments, and how much debt you carry (your debt to income ratio)

   2. Capacity: Your ability to pay off your mortgage based on your monthly income and bills

   3. Collateral/Value: If the property is worth as much or more than the amount you’re borrowing​
      On a typical loan, these three Cs’ are analyzed in detail during the underwriting process. The good news for hard money loans is that underwriters focus more on the collateral value rather than your capacity or credit, making it easier to get approved.

6. Approval: Once approved, you will be provided with a commitment letter that tells you all the terms and conditions of your loan. It is important to review and go through this letter with your lender to make sure you understand everything. You will typically need to purchase insurance that covers damage, fire, and theft before the loan closes.

7. Closing: The final stage is where you will sign all the loan documents and pay any closing costs. The process is similar to when you are applying for a loan. After your lender signs all the documents, an escrow agent will hold onto the loan until everything is paid off.

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