All Of Your Hard Money Loan Questions are Answered Here.

Hard money loans are different from conventional loans. The key difference is that they are funded by private investors — not banks or financial institutions, and they are short term from three months to one year. Hard money loans are considered commercial loans. They are not for consumers to use on their primary residence. Hard money loans are generally used by people who have an opportunity to make money but need a short term loan to do it.

Below are the most commonly asked questions about hard money loans and how to get them approved through us. If you need any other questions answered, please feel free to email us at info@wcldllc.com or call us at (703) 350-4339.

(Click on the question to reveal the answer)

How do I get a hard money loan?

Hard money loans are much easier to get than conventional bank loans. We only need some basic information from you by filling out our one page application. We will evaluate your project and give you the general terms and conditions that we need to follow to fund your project. We will hold a first lien position, and make sure you have the ability to rehab, sell, or refinance the property within the term of the loan.

I have a low credit score. Can I get a hard money loan?

Yes. The main criteria for hard money loans is the loan to ARV (After Repair Value) ratio. Your past credit history is considered but is not as important as it is in a bank loan. We can provide you with a pre-approval letter so that you can put it in your purchase contract.

What are the lender fees?

It depends on the loan to ARV (After Repair Value) ratio. We can give you a firm answer after we evaluate your project. But industry standard fees are as follows:

  • Appraisal Fee–typically $350.We are familiar with many locations in the Washington Metropolitan area. In many cases we know the area so well that we don’t need an official appraisal to put a value on the property. However there are times that there might be a difference between what you think the property is worth and what our research shows. In those cases, the professional appraisal will be needed to get an unbiased opinion.
  • Document Prep Fee. There is a $750 document preparation fee by our attorney. This is typically collected after we have pre-approved your loan and you give us the go ahead to proceed with the lending process.
  • Commitment Fee–($1000 to $2000) depending on the loan amount and how many days we are from the settlement. Hard money loans are financed by private investors. Once we issue a commitment letter to you, we reserve the loan amount in a separate account. This money will only be used for your project. Sometimes there is a 30 to 60 days gap between this letter and the actual settlement. We have to pay interest on this money to the investors for this period. The alternative is to get the money from the investors at  settlement. WE DO NOT RECOMMEND THIS. In many cases we have been able to refund this fee to the borrowers at settlement. So we will do our best to keep the fees that you pay as low as possible.
  • 5% to 10% origination fee (also known as POINTS) . For example on a $100,000 loan this would be $5000 to $10,000 fee which is typically paid as a part of your closing cost at the settlement. However, in some instances this fee can be paid after the project is completed. This can be done by adding this fee to the loan amount.
  • Monthly interest. (1 to 1.5 % per month). On a $100,000 loan this would be $1000 to $1500 per month. The interest will be due the 1st day of the month following the settlement. There are instances where we can waive the interest payments and add them to the loan amount which would be due at the end of the loan term.

The above fees are subject to change and are just listed as a guideline to help you get a ball park figure on the cost of financing your project.

When is a hard money loan not appropriate?

Hard money is not appropriate in some circumstances:

  1. When you need money “long term.” Most hard money deals are for no more than 6 months to 1 year;
  2. When the deal is “tight.” Don’t look for hard money loans higher than 65-70% of the conservative property value, if that. Hard money lenders aren’t interested in losing money, and the only way to insure that is to lend based upon very conservative loan-to-value ratios;
  3. Oddball properties. Not many hard money lenders are looking to get involved in farm operations, mobile homes, or geo-desic domes. If your project is an “oddball property,” don’t bother pursuing a hard money loan.
  4. Principal residences. Washington Commercial Lending & Development , LLC is not properly licensed to provide loans to owner-occupants. We only lend on commercial or investment properties.

Will you lend on a primary residence?

No. State and Federal laws have strict disclosure requirements for consumer mortgage loans, as well as “caps” on fees and interest rates. Washington Commercial Lending & Development , LLC is not licensed and does not lend on primary residences.

I am days away from foreclosure. Can you help? Can I get a loan?

Maybe. Hard money loans can close quickly, so depending on how soon your upcoming foreclosure is, we may be able to close a loan beforehand. If not, there still may be many options available to you to stop the foreclosure proceeding. If you contact us, we will try to help you find a solution. And remember to always review all your options with a real estate attorney or a consultant experienced in these matters.

Why shouldn’t I just use my home equity credit line?

You can, and certainly the interest rate is bound to be much lower than a hard money loan. Just remember that the more credit you take out on existing credit lines, like the ones you may have on several of your rental properties, the lower your credit score will go, as potential creditors don’t like to see you “maxing out” your open credit. It is a sign of potential distress. Most hard money lenders are private companies or individuals and do not report to the credit bureaus, so your credit scores are better protected.

What are the loan terms?

Every hard money deal has different lending criteria and different point structures and interest rates. As a general rule, count on an interest rate anywhere from 12-18%, and you will probably have to pay anywhere from 5-10 points. Sometimes we will require points to be paid up-front, while other times we can build them into the loan amount. We have come to find that each hard money deal is unique and it is impossible to provide exact numbers and loan structure until the deal is reviewed and approved, although all loan terms are always disclosed up-front and long before settlement.

Are there pre-payment penalties?

We often require a 3 months minimum guaranteed interest period. However we will advise you on the exact amount when we provide you with the commitment letter.

Can I get cash-out to pay tax liens, judgments or other debt?

Judgments and liens that appear on your title must be paid off at closing but, after payment of these items, you may use any additional equity in your property to get cash at closing up to the “loan-to-value” limits.

For instance, if you have a property valued at $100,000.00, and owe $30,000.00 in tax liens, and we approve a loan for 60% of the value of your property, then you will be able to take an additional $30,000.00 at closing for your own use, less any applicable closing costs and lender fees.

What documents do I need to get started?

We need copies of contracts, appraisals, comparable sales, and any other information that you have that can make it faster for us to evaluate the property.

Do you check the title? Are there title fees?

Yes. As with a conventional loan, we will require you to pay for a title search of the property to make certain that you have proper title to the property and the lender is being put in proper first lien position. You will also have to pay for the title/escrow company to close your loan, record a mortgage or deed of trust in the land records, and issue lender’s title insurance to protect the lender’s interest in the property.

Is there a limit to the number of properties I can buy?

Sometimes. We will generally lend you up to 65% of the property value and, unlike a conventional lender, will not reduce the loan amount just because the purchase price is much lower than the property value. Thus, if you buy right, you may be able to get a loan for 100% of the purchase price, although most times we require you to at least pay closing costs.

For example, if you find a property worth $100,000.00 and get the sellers to unload it for $60,000.00, we may well give you the full $60,000.00 purchase price.

On the other hand, if you are buying a rehab property that is worth only what you are paying for it until such time that it can be repaired, we will most likely will do one of two things: 1) give you only up to 65% of the purchase price (which means you must find the other 35%); or 2) give you the full purchase price and require you to establish a construction escrow to insure you make the repairs to increase the value to an amount substantially higher than the original purchase price.

Do I need an appraisal?

Yes. We determine value in several different ways: 1) appraisal from a licensed appraisal; 2) appraisal from real estate broker (Broker Price Opinion); and/or 3) internal appraisal by our underwriting team. You will be charged up-front for our valuation of the property and we will obtain the type of appraisal that best allows us to determine value. These fees are non-refundable.

Where do you lend?

We generally lend within a 50 miles radios of the Washington DC Metropolitan area. However, we have gone beyond this radios on some occasions.

Do I need to provide personal income statements?

Maybe. Every deal is different. Once your deal is preliminarily reviewed, you will be told by the underwriter which documents you will need to provide.

Are you a licensed lender?

Washington Commercial Lending & Development , LLC is not a licensed “mortgage lender” and does not lend money on primary/principal residences. We are a commercial/investment lender. All our loans are either funded by us or by one of our private capital sources. We also broker hard money loans to other hard money lenders within our network for a fee.

What type of properties do you fund on?

Currently we lend on residential investment properties and “light” commercial, such as 1-4 unit properties, smaller apartment buildings, small retail shops or office buildings, small bars or restaurants where there is real estate, single family homes, and strip shopping centers. We have relationships with other commercial lenders that handle larger projects, so feel free to contact us and we can refer you.

Are the loans fully amortizing?

No. Most or our hard money deals require interest-only payments that usually “balloon” in 6-12 months, meaning the entire principal must be paid back at that time.

Do you lend on purchase price or appraised value?

We usually lend on appraised ARV (after-repaired-value). Thus, if you purchase a property far under its ARV, we may be able to lend you 100% of the purchase price. You will, however, usually have to pay closing costs.

Can I roll closing costs into the loan?

Sometimes we will allow you to roll points into the loan. However, most other title and lender fees, or other closing costs, will have to be paid by you at closing.