What Borrowers Should Know About Origination
Working with a hard money lender for the first time can be overwhelming, but it doesn’t have to be confusing. Understanding the structure, borrower requirements, and what you should expect is essential for a smooth process.
What is a Hard Money Loan?
In essence, a hard money loan is one that a private lender funds, rather than institutions like banks. They are normally short term, with repayment taking place in about a year, though lenders can extend them further. For repayment, borrowers need to make monthly interest-only payments with a final “balloon” principal payment at term-end.
Why Hard Money Loans Best Suit Fix and Flippers
If you’re looking to fix-and-flip a property, a hard money loan is a great option help you start. The ability to make one balloon payment at the end plus their short term nature are a big part of why they work. In addition, the money to purchase a property and the cost of rehab are included. These set hard money loans apart from traditional loans.
What You Need to Start the Origination Process
One of the great things about hard money loans is that while lenders look at your credit, they place a bigger emphasis on the property you intend to purchase. It’s important when applying for a hard money loan to have all the information about the property, as well as rehab costs, the contractor you have chosen for repairs and other vital information at the beginning of the process so the lender can decide (usually in a very short amount of time) if the loan is something they are interested in.
What is the Difference Between an Origination Fee and a Processing Fee?
An origination fee is what you, the borrower, pay to the lender to originate a loan. It normally amounts to 2.0% of the total loan. It’s possible to negotiate a lower fee, however, it could mean paying higher interest rates. The processing fee, on the other hand, only covers the cost to underwrite the loan. These fees are meant to gain lender expertise and funds.
Once the potential borrower has collected all the required documents for his project, all one needs to do is fill out the online application to start the process and should receive a preliminary term sheet within 2 business days.
The BMC Way
At Bay Mountain Capital, how we help you is part of what makes BMC different than the rest. We have been in business for over 12 years and have processed over $350 million in loans. When it comes to hard money loans, our company has been providing them to borrowers before they were commonplace in the industry. That experience results in tremendous value for our borrowers. For us, processing and providing loans is science.
If you’d like to learn more about how Bay Mountain Capital can help you with hard money loans, contact us today. And be sure to stay tuned for Part 2 in the Origination series: Underwriting.
About Bay Mountain Capital:
Bay Mountain Capital has been in business for more than a decade, closing approximately 2,000 loans. We specialize in financing all types of residential and commercial property investments throughout Texas and Georgia. Using common sense and value-added approach, we strive to incorporate these principles into our underwriting and closing processes.
As a direct lender, Bay Mountain Capital can close a loan within one day after receiving a complete file and clear title. The process generally takes two weeks for a residential loan but can be accelerated where circumstances require it.
We are primarily an asset-based lender, which means that qualification requirements are limited. Our rates and fees are among the lowest in the industry.