Greenbook: A Local Guide to Chesapeake Living - Issue 3 | Page 15

Understanding
Hard Money
Loans
Commentary by Roberto Pineyro
and Jason Kotar
With the number of bank-owned
foreclosure properties on the rise and
the decline in home values throughout
the country, there are certainly good
deals to be found if you are looking to
purchase an investment property or
two or refinance a default personal
mortgage loan.
The fact is not many real estate
professionals and investors are
familiar with hard money loans.
No matter how good of a deal you
can get on a property, qualifying to
purchase an investment property can
be very difficult under conventional
lending guidelines. Additionally, many
conventional mortgage lenders have
not only tightened their lending
guidelines, but have simply done away
with financing investment properties.
If you are planning on building a spec
home, purchasing a property as an
investment, or are even a real estate
agent working with someone who
would like to purchase a short sale or
investment property, knowing what
types of private financing are
available and a general understanding
of how private “hard money” financing
works is a must.

Hard money loans are generally
used to purchase non owner-occupied
investment properties or refinance
owner occupied foreclosure bailouts.
Hard money loans are also equitybased instead of credit and asset
-based, so the borrower does not have
to meet the same lending criteria,
income ratios, and credit worthiness
that they would have to meet under
conventional lending guidelines.
Hard money deals are backed by
private investor capital and are
reviewed and approved on a case-bycase basis. Generally, if the
borrower is interested in purchasing
an investment property, the only real
requirement is that the property truly
is a good investment for everyone
involved.

- The lender must also hold “first
position” on the property. This means
that the hard money lender must hold
the primary, 1st mortgage on the
property. Hard money lenders will
rarely lend a 2nd mortgage on a
property unless there is other
collateral involved.
- Another benefit to hard money loans
is that often times the total interest
and points for a portion of or the
entire loan term are “rolled” into the
loan amount and paid in advance at
closing. This means that most
borrowers will not have to worry
about paying a monthly mortgage
payment to the hard money lender
for most, if not all of the loan.

- Hard money purchases can be closed
in as little as 5 business days and
So what signifies a good deal in the
financing is available for nearly any
eyes of a hard money lender?
type of property. Many hard money
lenders will finance everything from
Here are some general guidelines hard raw land, to single family rehab
money lenders follow:
properties, to large commercial, hotel,
and condo developments.
- The total loan amount is no greater
than 60% of the current, as-is value of Roberto Pineyro is a principal with the
the home. This is also referred to as
Global Financial Funding Corp. He can
the loan-to-value ratio or “LTV.”
be reached at [phone].
- The borrower has a stake in the
property rather it be their own cash
they are investing or even other
investment properties they are using
as collateral to secure the loan. Most
hard money lenders generally like to
see that the borrower has at least 20%
of their own cash invested in the
project, not including closing costs.

Jason Kotar is president of Kotar &
Associates and Diversity Lending
Group, Inc.
Reprinted with permission from
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