The Process of Getting Hard Money - by Becky Sanders

If you don't have any private investors, then hard money is the next choice for financing your ugly house deals.

First you need to find a hard money lender. I have another post on this board regarding this, how to find them, and even listed some, so I won't get into that here. You should get preapproved BEFORE you need the money for your first deal. The preapproval process varies from lender to lender, but the instructions are fairly routine.

Once you are preapproved and you've gotten a house under contract, then contact your hard money lender. They will require that you send in a copy of the Purchase & Sales Agreement. They'll also have a loan application which you'll need to fill out and they will require an itemization of your proposed repairs (usually they have a form for this). The loan application will also ask for estimated closing costs, which you can get from your attorney or title company. By the way, the proposed repairs form will be itemized differently than the Ugly House forms we use from the bootcamp. Just estimate (guesstimate) the costs, but bump them up a little bit because there is no line for placing your 20% hedge. The lender may also ask you to send them comps and fill out a comparative analysis-type form. Get your comps from a Realtor. By the way, do not procrastinate filling out these forms and getting them in to the lender. I know it's difficult getting through them the first time, but it's never an exact science, so just do your best with filling them in.

Some things that the hard money lender will require before closing is an appraisal (which they will arrange), a survey (which should be provided by your seller), an insurance binder (which you'll have to get), and title insurance (which will be arranged by your attorney or title company). Get the process going immediately because there are always some hitches along the way that might hold things up.

Some upfront costs you always will have are the cost of the appraisal and any processing or administrative fee charged by your lender, which will total a few hundred dollars. If the purchase price and repairs do not exceed the maximum LTV policy of your lender, then you may be able to wrap some or all of your closing costs and/or interest payments into the loan depending on your lender.

Most lenders can close in less than 2 weeks if they receive all the required documents (above) in a timely manner. Once everything is in line and a closing has been scheduled, the hard money lender will wire the funds to the title company to be distributed per the HUD-1 Statement, which will be prepared by the title officer. The HUD-1 statement is an itemization of all the money coming in and all the money going and it itemizes line-by-line all of the costs, who's paying each of the costs, and whether they're being paid out of the loan proceeds or outside of closing (for instance, your appraisal fee will have been paid outside of closing).

Don't be afraid to ask questions of your hard money representative, your title officer, or your attorney. They're working for you and you're paying them, so make sure everybody involved is doing their job and getting everything done in a timely manner. Also, if you are closing without an attorney, you'll want to keep in contact with your seller or your seller's attorney (especially if it's a private individual) to make sure that they get everything done that they need to bring to closing (such as the survey, the title insurance, and a clear Deed).

If you don't have any private investors, then hard money is the next choice for financing your ugly house deals.

First you need to find a hard money lender. I have another post on this board regarding this, how to find them, and even listed some, so I won't get into that here. You should get preapproved BEFORE you need the money for your first deal. The preapproval process varies from lender to lender, but the instructions are fairly routine.

Once you are preapproved and you've gotten a house under contract, then contact your hard money lender. They will require that you send in a copy of the Purchase & Sales Agreement. They'll also have a loan application which you'll need to fill out and they will require an itemization of your proposed repairs (usually they have a form for this). The loan application will also ask for estimated closing costs, which you can get from your attorney or title company. By the way, the proposed repairs form will be itemized differently than the Ugly House forms we use from the bootcamp. Just estimate (guesstimate) the costs, but bump them up a little bit because there is no line for placing your 20% hedge. The lender may also ask you to send them comps and fill out a comparative analysis-type form. Get your comps from a Realtor. By the way, do not procrastinate filling out these forms and getting them in to the lender. I know it's difficult getting through them the first time, but it's never an exact science, so just do your best with filling them in.

Some things that the hard money lender will require before closing is an appraisal (which they will arrange), a survey (which should be provided by your seller), an insurance binder (which you'll have to get), and title insurance (which will be arranged by your attorney or title company). Get the process going immediately because there are always some hitches along the way that might hold things up.

Some upfront costs you always will have are the cost of the appraisal and any processing or administrative fee charged by your lender, which will total a few hundred dollars. If the purchase price and repairs do not exceed the maximum LTV policy of your lender, then you may be able to wrap some or all of your closing costs and/or interest payments into the loan depending on your lender.

Most lenders can close in less than 2 weeks if they receive all the required documents (above) in a timely manner. Once everything is in line and a closing has been scheduled, the hard money lender will wire the funds to the title company to be distributed per the HUD-1 Statement, which will be prepared by the title officer. The HUD-1 statement is an itemization of all the money coming in and all the money going and it itemizes line-by-line all of the costs, who's paying each of the costs, and whether they're being paid out of the loan proceeds or outside of closing (for instance, your appraisal fee will have been paid outside of closing).

Don't be afraid to ask questions of your hard money representative, your title officer, or your attorney. They're working for you and you're paying them, so make sure everybody involved is doing their job and getting everything done in a timely manner. Also, if you are closing without an attorney, you'll want to keep in contact with your seller or your seller's attorney (especially if it's a private individual) to make sure that they get everything done that they need to bring to closing (such as the survey, the title insurance, and a clear Deed).