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BENEFITS //////
• Funding $100,000 - $5,000,000*
• Interest only option - lower monthly payment
• All property types considered
• Fast - 3 weeks
• No Personal Credit requirements
• Bankruptcy OK
• No use of funds restrictions
• Foreclosure bailouts available
• Stated income OK
*Higher loan amounts on case by case basis
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/// ///DOCUMENTS
• Complete CRE section in CRM
• Application
• Property photos - interior and exterior
• 12 month income statement if property is income producing
• Purchase sale agreement - if purchase mortgage
• Additional documentation required after pre-qualification
////// REQUIREMENTS
CRITERIA
FICO NA
TIB 0 (startup)
ANNUAL GROSS REVENUES $0
BANKRUPTCY Discharged
JUDGMENTS AND LIENS Yes if in payment plan
CREDIT PARTNER OK? Yes
SECURED OR UNSECURED Secured
INDUSTRY IMPORTANT? No
FUNDING AMOUNT $100,000 - $5,000,000
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FUNDING PROCESS //////
Member Office Role
• Submit documents for in-house prequalification (24 hours)
• If prequalified arrange introduction/handoff/phone call
Processing Role
• Present to LOI/fee agreement to Borrower (48 hours)
• Obtained signed LOI/fee agreement with deposit(s)
• Review or order appraisal or BPO (up to 3 weeks)
• Review or order title work (up to 7 days; simultaneously)
• Obtain any needed documents from Borrower
• Sign on Loan and fund
• Owner Occupied Properties Prohibited
• Prohibited States - North & South Dakota
• Land loans on case by case basis
• Construction loans only in Arizona and California
RESTRICTIONS //////
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/// ///SECONDARY DOCUMENTATION
• Purchase Contract/Payoff Statement (if refi)
• Contractor’s Estimate (if applicable)
• Copy of Driver’s License
• Bank Statements (3 months)
• Tax Returns (2 years - business and personal)
• Property Appraisal (will be ordered upon receipt of application if not
provided)
• Proof of Funds (for down payment and 6 months of monthly payments)
• Hazard Insurance (replacement cost value)
• Closing/Escrow Attorney Contract Info
• If refi:
• Deed and Reconveyance if paid in full
• Update Payoff Statement if balance owed
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TERMINOLOGY/// ///
1. Acceleration Clause
A clause in a mortgage or deed of trust that advances the due date of the debt. These are frequently found in
private money commercial loans.
2. Amortization
The gradual reduction of a loan balance, generally made in regular payments over a specified period of time.
Payments are typically made to cover interest and principal. Many private money loans will typically be
interest only because they are for a shorter duration than bank loans.
3. Appraisal
Written professional opinion and analysis of the estimated market value of real estate which will be used as
collateral for the private money loan
4. Arrears
An overdue debt caused by a missed payment.
5. Assessor’s Parcel Number (APN)
Number used by the tax assessor to identify a parcel of land.
6. ARV - After Repair Value
What the market is willing to pay for the property after it has been repaired, fixed up and finished to appeal
to the market After Repair Value. What the market is willing to pay for the property after it has been
repaired, fixed up and finished to appeal to the market
7. Automated Valuation Model (AVM)
Method of evaluating real property using a mathematical formula
8. Balloon Payment
Lump-sum payment that may be required at the end of some mortgage loans, or at a specified period of
time (e.g. 5 years into a loan). A balloon payment due may be for all or some of the loan amount and will
generally be specified in the promissory note.
9. Blanket Loan
Loan that encumbers more than one property. If a borrower needs a larger loan amount than a single
property will allow, one creative solution is to combine properties and make a single loan, using all the
properties as collateral.
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10. Bridge Loan
Loan meant to help bridge a gap. They are typically short term loans and are not meant to be a permanent
financing solution. The exit strategy from a bridge loan is typically the sale of a property or a takeout loan that
the borrower will qualify for after a certain period of time or after specific actions have occurred (property
gets leased up, construction is completed, etc.).
11. Broker Price Opinion (BPO)
Property inspection by a licensed real estate broker which results in a written evaluation of the property and
the estimated sale price
12. Clear Title
Title that is not in any way form or shape encumbered or burdened with any defects
13. Closing
Period that marks that a loan transaction is final
14. Clouded Title
Any claim, encumbrance or defect that contradicts the title record as understood by the property owner or
interested party Any claim, encumbrance or defect that contradicts the title record as understood by the
property owner or interested party
15. Collateral
For real estate loans, the collateral is the real property used to secure repayment of a loan.
16. Combined Loan to Value (CLTV)
Sum of all liens on the property divided by the value of the property. Hard money lenders often use the term
LTV synonymously with CLTV. CLTV is typically used when there’s more than one lien and LTV when there is
only one lien.
17. Debt-to-income Ratio
Amount of money you have to pay out each month as a percent of your gross income. For example, $2,500 of
debt service / $5,000 of gross income = 50% DTI (debt-to-income) ratio.
18. Due on Sale Clause
Provision in a deed of trust calling for the total pay-off of the loan balance in the event of a sale or transfer of
title to the secured real property.
19. Estoppel Certificate
Form used in real estate to verify facts on a property regarding rents, leases, mortgage balances, monthly
payments, etc
20. Hard Money
Loan not made through an institutional or conventional lender. Often they are funded by private individuals,
fractionalized among many individuals or are made by larger groups or funds.
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21. Hard Money Lender
Lender that makes private money loans. Funds are typically from the lender’s personal account, or raised
from a private investor
22. Interest Only
Loan where no principal is paid, only the interest. At the end of the loan term a balloon payment is due for
the full principal amount.
23. Interest Rate
Percentage rate that lenders charge for use of their money.
24. Interest Reserve Account
Account where prepaid interest is held, typically to make payments on the loan for a set amount of time
25. Internal Rate of Return (IRR)
Rate of return on an investment that considers positive and negative cash flows over a specific period of time
26. Junior Lien
Lien against a property not in first priority or position.
27. Junk Fees
Charges assessed at the closing of a mortgage that go to the originator or lender. These fees are hidden
in the mortgage documents and are usually assessed as raw dollars rather than “points” or a percentage
of the loan. Some common fees that may be considered junk fees include settlement fees, sign-up fees,
underwriting fees, funding fees, translation fees and messenger fees.
28. Lender
Private, public or institutional entity which makes funds available to others to borrower.
29. Lien
Legal claim on real property generally for the payment of a debt or obligation.
30. Limited Personal Guarantee
Guarantee by a borrower to a lender for the entire outstanding loan amount plus legal fees, accrued interest,
and costs associated with collecting the loan. The guarantee entitles the lender to look to the borrower’s
personal assets to recover any unrealized balance due in which foreclosure and re-sale of the asset does
not satisfy the debt but sets a dollar or some other limit on the amount of liability. Many limited personal
guarantees contain conversion clauses that state if fraud is involved in the transaction the guarantee converts
to an unlimited personal guarantee.
31. Loan to Value (LTV)
Calculated as a percentage based on the value of a property. Divide the loan amount by the value of the
property and express that number as a percentage and you will have the LTV. For example, a loan amount of
$100,000 on a property worth $200,000 would be 50% (100,000/200,000 = .50 expressed as a percentage it is
50%). It is the driving factor behind hard money loan approval. The lower the loan to value, the more secure
the transaction is for the end investor. Due to this, lower loan to value transactions also will typically come
with more advantageous terms than higher LTV loans.
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32. Market Value
What the buyers on the open market is willing to pay for a property
33. Net Present Value (NPV)
The value of a cash flow stream in today’s dollars. Calculated by applying a discount rate to a cash flow
stream. Components of the calculation are the amount of the cash flow stream, the timing of the stream,
and the opportunity cost.
34. Non-Recourse Loan
Loan in which the lender is not entitled to pursue the borrower’s other assets owned if the debt is not fully
satisfied by the collateral in the event of foreclosure and re-sale of the property.
35. Notice of Default
First phase of the two step foreclosure process in most states. The notice, which is prepared and recorded,
mailed and/or posted by the foreclosing trustee, contains particulars regarding the default in payment, the
affected deed of trust, etc. The default period time to allow the debtor time to bring loan current or payoff
the loan.
36. Seasoning
Term used for the length of time something is held. Usually it applies to funds or property. Seasoned funds
can be shown to have been in a bank account for a set period of time. Seasoned property has been held by
the same owner for a set period of time.
37. Subordination
Typically used to reference a document that an existing lender will sign to allow a new loan to take a senior
lien position.
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////// OBJECTIONS & REBUTTALS
• Process takes too long I need the money fast.
• No matter what real estate lender you use everyone is going to have requirements that need to be met.
• With us we only need the BPO (appraisal) and title work to complete our transaction. Many other lenders will
continue to give you stipulation after stipulation. Not with us appraisal (BPO) and title work and we are ready
to fund.
• Costs and fees are too expensive.
• We are as competitive as we need to be. We know what our competitors charge across the country. We do
not charge the “Junk Fees “ you will see how inexpensive we really are.
• I don’t want a balloon payment.
• All of our loans are interest only. That way you can have a cheaper monthly payment.
• As you reestablish your credit your payments will be less expensive and give you the opportunity to seek out
alternative financing.
• I do not want to pay for appraisal or B.P.O.
• Unfortunately no matter where you go every lender is going to have you pay for an appraisal or B.P.O.
• We will make every effort to ensure the value will be what we need prior to ordering the B.P.O or appraisal.
• Keep in mind that you can use this for your insurance company as well as you now know the true value of
your asset.
• I do not want to pay a loan application fee.
• We only retain this fee if you do not take our loan we provided you based on the terms of your LOI.
• Most lenders charge an upfront non-refundable fee. If we do not perform you get your loan deposit back. No
other lender or broker can say that.
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/// COSTS & COMMISSIONS
$300,000 FUNDING
UP TO 1 POINT
If a member office closes a deal the above chart illustrates commission payouts. Total office
payout would be $3,000. Sponsor would be paid $375, Standard Level Agent $750 and the
Member would net the rest, $1,875 for a gross pay out of up to 1 point or $3,000.
///
EXAMPLE COMMISSION PAYOUTS