California has always been a popular destination for people to call home, due to its artful mix of urban living coupled with natural, rolling landscapes. Many borrowers find choosing a hard money lender in California to be the best way to finance their next California real estate purchase.
Hard money loans have been popularized for being fast and flexible. But with thousands of hard money lenders to choose from, it can be a bit of a challenge narrowing in on who the best hard money lenders in California are.
Choosing the best hard money lender in California can really set your real estate transaction up for financial success. Whether you are searching for San Diego hard money lenders or hard money lenders in San Francisco, here are some essential tips to finding the best hard money lenders in California.
Who Are Hard Money Lenders?
Hard money lending is a unique type of short-term financing for real estate transactions. Trusts, businesses, and private investors that offer hard money loans are referred to as hard money lenders.
The best hard money lenders in California use an asset-based approach to approving your credit request. That means less emphasis is put into scrutinizing factors such as your employment history or credit score, rather focusing on the underlying real estate securing the loan.
Hard money lenders in Los Angeles, hard money lenders in San Francisco, and even San Diego hard money lenders can offer hard money solutions with greater flexibility compared to traditional mortgage loans, making them ideal for both homebuyers and investors.
Things to Consider When Choosing a Hard Money Loan For Real Estate
The best hard money lenders in California can help simplify your next real estate transaction. But before you make any financial decision, it’s important to weigh the pros and cons so that you fully understand how hard money loans work before you commit to anything. Here are a few factors to consider when evaluating loan options from the best hard money lenders in California.
Terms and Rates
It’s important to pay close attention to both the terms and rates when choosing a hard money loan. Keep in mind that due to the distinct advantages that hard money loans provide, they tend to retain higher rates compared to traditional loans. Nevertheless, the value you get from a hard money loan is incomparable.
Additionally, hard money loans tend to have short durations, often between one and five years. When searching for the best hard money lenders in California, consider which lenders are willing to be flexible with their loan terms. You also want to find a provider willing to build a customized solution centered around your specific financial objectives.
Loan-to-Value Ratios
The best hard money lenders in California understand real estate risk very well. Because they take an asset-based approach, expect most hard money lenders to offer loans around 60% to 70% of a property’s market value. If you are using a California hard money loan to fix-and-flip a property, some lenders may utilize an after-repair value (ARV) which considers the cost to acquire and improve a property.
Funding Speed
When considering a hard money loan for real estate, it’s important to factor funding speed into your decision. Data shows that it often takes 30 to 60 days to be approved for a traditional mortgage, although sometimes it can take longer.1
The best hard money lenders in California can approve and disburse the funds you need to close all within a matter of days. This makes hard money loans especially powerful for investors looking to close more deals quickly, with little to no contingencies.
Prepayment Penalties
Before you make any financial decision, it’s always important to read the fine print. While every lender is different, its common for hard money lenders to require three to six months of guaranteed interest. If you pay off your hard money loan early, there could be either a soft or a hard prepayment penalty.
A soft prepayment penalty often involves prorating a portion of payments owed, only charging any remainder months up to the prepayment amount. A hard prepayment penalty requires payment of all payments under the prepayment amount, regardless of if any payments had already been made.
Understanding how prepayment penalties work in relation to hard money loans will give you a better grasp of how to fully optimize your financing for a successful real estate transaction.
Essential Tips to Finding the Best Hard Money Lenders in California
Tip #1: Determine Your Personal Financing Needs
Every real estate situation is unique, so it’s important to determine what your personal financing needs are before applying for a new hard money loan.
While there are a lot of hard money lenders to choose from, the best hard money lenders in California should specialize in the type of financing you are interested in pursuing, whether that be residential real estate, commercial properties, foreclosed homes, etc.
Once you determine which preferred lender specializes in the type of financing you are looking for, you can better evaluate your loan options to find the solution that offers the most bang for your buck.
Tip #2: Keep Your Search Local
This may seem obvious, but the best hard money lenders in California tend to be those located in California. Many borrowers make the mistake of choosing a hard money lender to finance a property in a state that they rarely lend money. In doing so you run the risk of your lender not truly understanding the complexities of your market. Instead, keep your search local so that you don’t have to waste your time educating your lender on local real estate trends.
Tip #3: Review a Lenders Reputation and Testimonials
Hard money lending is often very niche. In order to find the best hard money lender in California, its important you obtain as much information as possible about your lender before partnering up. Make sure to review your lenders reputation by analyzing past client reviews and testimonials.
Your lender should have an exemplary record with the Better Business Bureau (BBB) and should be able to provide you referrals upon request. This data should help you to avoid potential scams and assist you in cohesively forming the conclusion that the lender is the right person to partner with.
The Best Hard Money Lenders in California, Independent Lending
When it comes to choosing the best hard money lenders in California, you can’t go wrong with Independent Lending. Independent Lending is California’s premier hard money lender servicing most areas including the Los Angeles, San Francisco, and San Diego metros.
Our asset-based hard money loan programs include no hidden charges, upfront fees, and fast approval decisions. Offering 5-star service, Independent Lending is committed to providing a exceptional custom experience through clear communication and greater efficiency.
Contact us today to learn more about what makes us the best hard money lender in California.
