Efficiency – Learning the Hard Money Loans Process

The process of receiving hard money loans do not vary greatly from the traditional funding process. Each individual or department has a role to play. The following scenario covers commercial hard money, as well, giving you a solid idea of the important documentation required, how assessments can be made regarding risk, and the overall issuance of the loan.

Documentation

Before anything begins, a loan package must be created – essentially, this is a financial statement on the organization or individual seeking the funding. Information about the asset being purchased, credit rating of the Borrower, and income verification should all be included, as it ensures that the Lending group has all of the particulars required. Title documentation should also be a part of this package.

Although there is limited regulation with hard money lenders, the requirement for full disclosure of the loan details is squarely in place. This will include both federal and state documents, and the requirements are quite similar with commercial hard money.
The biggest requirement throughout the process of hard money lending is the simple coordination of the players involved. Titles, appraisals, and closings must be choreographed to insure a smooth integration.
It should be noted that every step of the process should involve informing the client, keeping them abreast of the situation.

The phases of funding can be broken down in two important categories. First: what happens prior to signing the loan documents? And, second: what happens after the loan documents are signed?
The entire process begins with the Title Company. They will research the individual or organization requesting the funding, as well as the seller in certain instances. A background check is completed which includes a records search for any liens or judgments, and a preliminary title report is issued. This verifies that the property can be used as collateral after escrow is closed.

The next stop in the process is the escrow department. This is a neutral third party which can be located within the Title Company. The main responsibilities of the team are to collect all of the proper documents, to determine the authenticity of the paperwork, and to collect and disburse the funds. In addition to collecting data such as pay off amounts, there is also the responsibility for collection of the property tax documentation. This research may include findings not only on the corporation where applicable, but on the individual members as well. The department will also oversee the final closing process which is the signing of the documents.

After signing on the dotted line, the second phase of the process begins. Hard money lenders are notified by the escrow department to wire the money into the escrow account. Again, the same scenario applies to commercial hard money.

The escrow department then records the deed and any other necessary documents with the appropriate government agencies—generally the county. Finally, the escrow department disburses the funds, usually within three days. These time frames even hold true in complex marketplaces like the Los Angeles hard money industry.
The last step in the process is the issuance of title insurance. It is at this point that the loan is considered closed.
With coordination the process should be seamless. The key to success is to be proactive. Do your due diligence, work with competent organizations, and establish relationships with the various service providers.
When involved with hard money lending, keep the process as streamlined as possible. If you do, the hard money loans process will be efficient and go off without a hitch!