It’s a great time to be a California commercial real estate borrower if you have profitable properties. Prices are static for the first time in years, the private business loans the market has prospered and loan-to-value (LTV) ratios have increased. New consumer protection regulations have worked in your favor, and new administration may mean more proactive borrowing rates and relaxed property taxes. The problem is the Fed’s slight increase in the interest rate, which raised mortgages from 3.8 percent last year to 4.5 percent the next.
The advantage of alternative money lenders What they do have is that they offer more convenient procedures than banks, faster rotations, more flexible terms, and an underwriting process easier than ever. Add to that the myriad of recent protection laws passed in your favor by the California federal government and consumer agencies and you may be in luck.
Are you looking to buy a house, do some renovations or do some renovation? Look no further. If you live in California, hard money loans are a viable alternative. Best of all, local lenders are competing for business, offering more aggressive terms and tighter prices than ever before.
House prices are slowing
The California Association of Realtors (CAR) showed that prices are finally slowing down for the first time in decades. Five years ago, prices rose from $ 300,000 in 2010 to $ 500,000 the next year with only a slight drop in the first two years. If you have a home that cost you $ 43,000 ten years ago, you could sell it for double that price next year. In fact, 2016 is a great time not only to sell but to buy as well, as house prices are only slightly climbing head, by a mere percentage or two. Expect more and the CAR warns that global economic uncertainty and higher predictable Fed rates may put prices out of reach.
Just because prices are slowing down doesn’t mean prices are affordable. Far from there. The California housing market has a reputation for higher home prices and rents than anywhere else. But if you’ve been turned down by your bank, need the loan to fix or buy, and you have a promising property in mind, a hard money lender can be a promising solution. He or she assesses the value of your property rather than your credit history and awards you money accordingly.
California’s Alternative Loan Market
For those who are familiar with banks or others alternative loans institutions and nothing or little else, the hard money lending niche can be a pleasant surprise. Originally notorious for its high prices and low loan-to-value rates, this market has divided its competition and caused lenders to outbid each other with more aggressive terms, faster procedures, higher LTVs, and tighter prices.
A fleeting glance at a hard money lenders‘in California (BiggerPockets.com), for example, it shows 578 listings. Approximately 65% of these offer LTVs that reach 80 to 100%. Five years ago, it would be difficult to find such attractions. Most are offered in the 50-60% range. In that directory, you will also find lenders offering all types of loans, from residential to commercial, commercial, and intermediate. Are you worried about the amount of money you can borrow? Many private lenders partner with organizations or individuals to be able to offer you loans ranging from $ 100,000 and up (average loans seem to be around $ 150,000). Most promise a quick handover so you can complete your repair or change in the shortest time possible or jump to the front of the queue to bag that house. For comparison: banks take at least 60 days to process your documents. You should provide forms, sign tons of forms, pay to have your FICO and credit history examined, as well as all related matters. And at the end of it all, you may not receive your loan. Real money lenders do all of this in a fraction of the time, up to a week, and hardly check your credit history. It is the value of the property that is still important.
The BiggerPockets.com Directory mentions that hard money lenders generally lend for very short terms, usually between 6 and 24 months. But in reality, rates, fees, terms, and hours vary from person to person, as each person lends out of their own pocket.
The shortfalls, of course, are the high price (twice that of the regular mortgage) and the fact that the lender can pocket your property if you don’t make the payments. (Fees typically range from 8% to 15%, depending on the loan amount and length of the term. When taking out a hard money loan, you will generally pay a fee that ranges from 3% to 10% of the loan amount; this fee is also known as payment. Those are points you will want to consider.
Loan-on-value rates have risen
Properties have their money equivalents, so for example if your property is worth $ 80,000 you will receive $ 1,000. Hard money lenders are known to pay surprisingly low percentages that tend to be around 50-60% of the value of the property. the warranty. This also put off borrowers. But in 2015 this changed. Hard money lenders in California expanded their LTVs from the usual 65% to 75% of the appraised value at more attractive rates. A cursory look at the latest reports from Los Angeles online loan agencies shows that one or two individuals or organizations even offer LTV at 100% of the appraised value. Given the tightness of the housing market, this may encourage more people to buy and sell homes and certainly creates a more optimistic future for hard-money lenders who live and do business in California.
Consumer protection regulations are in
These are just some of the laws:
Consumer Protection Law 6500 on Global Loans – The FDIC created Law 6500 on Consumer Protection which restricts global loans so that they cannot mature in less than 5 years. In some cases, these loans are even prohibited. This prevents them from becoming too excessive and further impedes their means of repayment.
Negative amortization prohibitions: Negative amortizations refer to cases where interest rates are so massive that the individual cannot keep up with repayments. As a result, the borrower goes into even more debt despite making repayments. The Government prohibits negative amortization.
The government checks your ability to pay – Federal consumer protection laws insist that lenders must perform some type of credit check or income check before issuing a loan. A lender who proceeds without proving the borrower’s financial standing, or who knowingly lends to a low-income borrower, makes what consumer protection calls a predatory loan. A judge can declare such a loan illegal and dismiss it if it occurs.
Advance payments: Federal law stipulates that the lender cannot request more than two advance payments of reasonable size, although the amount and amount depend on the structure of the loan.
2015 also saw the TRID which requires the lender to post their calculations and show you all the details of the transaction. This gives you time to reflect and question or restart the process if you wish.
In order to strengthen protection, the California Department of Business Oversight (DBO) recently surveyed the lending industry in the marketplace (P2P) to see how they could strengthen protection. This P2P industry includes all private non-governmental lending individuals or organizations. DBO Commissioner Jan Lynn Owen stated that the purpose of her survey was to “protect” consumers from fraud and exploitation. The DBO intends to adjust the scope and terms of its loan structure so that fewer lenders, and only the most qualified and honest, can practice.
So far, the DBO surveyed fourteen market lending platforms in California requesting five-year trend data on their investor and lending programs. The results of the survey are yet to come.
All of this slows down the loan process, but wouldn’t you rather have your money safe?
Healthy housing market
The prices are high, but that’s another factor. The demand for housing itself remains strong (although most prefer to rent). Many people in California are looking for affordable homes. California remains as desirable a place to live as ever. If you have the money and want to buy, you can still find affordable housing on the market. If you want to sell, experts say now may be an auspicious time. Private lenders (such as hard money lenders) are aware of this fact and are willing to help you. Market conditions encourage private commercial lenders to find promising clients, and if you appear to be one, they may adjust their rates accordingly.
Finally, although not definitely, there are rumors that a new administration could relax the property tax and slow the rise in house prices. We can’t trust these predictions, but wouldn’t it be great if they were?
How can you improve your success rate?
Approach the commercial lender as you would the bank. Create your request as a business proposal. focus on the value of the property; show how much you can afford in the long run and how investing would benefit you. Second, please affirm your historic success with real estate and your knowledge of the market …
If you manage to highlight the value of the property, it is very possible that you will take money within 24 hours that can help you move towards achieving your goal.