Private Money Loans vs. Hard Money Loans: What is the Difference?

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Hard money loans and private money loans are similar in some aspects while differ in others. But when discussed among investors, the layman, more often than not, is left with more questions than answers. Here, we will discuss the similarities and the differences between hard money and Private money. Please call us at 888.334.6636 to know more about private money and hard money lenders in California, Arizona, Oregon & Minnesota.

The similarities are as follows:

  • Both hard and private money are asset based loans, meaning they are dependent on the value of the real estate pledged as collateral.
  • The real estate collateral backs the loans more than the financial credentials of the person borrowing.
  • And last but not the least; they form the bulk of non-traditional lending sources.

The differences, therefore, lie in their organizational structures and the way they work. They are:

  • Hard money lenders form organized businesses and are licensed or bonded in some way. Private money lenders, on the other hand, are just private. They can be anyone, a friend, family member, relative, a business associate, etc. Whoever they may be, they lend you the funds you need, sometimes accompanied by an agreement, and others solely based on trust.
  • Hard money lenders have a criteria that a borrower must meet before they are deemed eligible for the loan. They have an interest rate, an appropriate duration, points and others. All these details are made known to the client before the loan is granted. These criteria are very important to people when they are selecting hard money lenders to suit their purposes. Lending limits, loan duration, interest are all open to discussion.
  • Hard money is easier to find than private money. Private money lenders do not advertise their services. They are either part of your circle or you hear of them through-world-of-the-mouth. But it is all on chance. Hard money lenders, in contrast, often advertise their services. It makes for good business to market what they are offering to the masses. Therefore, they are easier to find and almost no negotiation skills to secure a loan.

Hopefully, the above distinctions help you decide on the best way to get what you want out of your loan. We, at Source Capital, offer the best terms for Hard Money loans in California, Minnesota and Arizona. Source Capital is a licensed top rated direct premier hard money lender in California, Arizona and Minnesota. For more info, please Contact us or call us today at 888.334.6636. We look forward to working with you.

Hard Money Lenders in California

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Source Capital provides hard loans for residential and commercial real estate in Arizona and California. We finance with direct private capital which makes sure that the process is speedy and flexible. Conventional money lenders like banks and other financial institutions take more time, usually months, and ask for personal and financial details of the applicant. Source Capital, on the other hand, asks only some pertinent details but mostly concentrates on the equity of the real estate that is pledged as collateral. Please call us today at 858.705.6144 to know more about hard money lenders in California.

As we know, different States have different ways and laws of handling real estate transactions. Hence, California real estate buying and selling procedures vary for Arizona and other states. Source Capital offers direct and private support via hard money loans so that you get what you want in as little as a week. We lend hard money in all major cities of California including San Diego, Los Angeles, San Jose, San Francisco, Bakersfield, Riverside, Fresno, Sacramento and Anaheim.

Buying home in California involves a set of steps. Source Capital makes sure that all the documents and steps are taken diligently so that there is no inconvenience later on. We also look at the property ensuring that it is a viable option and help you close escrow. We work closely with various property types like residential (Single family, Multi-Family, Owner-Occupied) and commercial (Office, Retail, Industrial, Mixed-Use, Apartments). We have a set of general terms and conditions to highlight what we offer:

  • Loan Amount: $20,000 – $2,000,000
  • Points: 2.5 – 4
  • Interest Rate: 8.99% to 11.99%
  • Time Period: 6 months – 7 years
  • Loan to Value: up to 65%
  • No Prepayment Penalty
  • Amortization: Interest Only
  • There are no upfront and junk fees
  • Collateral is Real Estate

Below is a brief rundown on the processes involved when you are trying buy a home in California:

Inspection of the Real Estate

Most buyers opt to have the house inspected by professionals. Typically, inspectors examine contractor inspection (includes electrical, plumbing, heating systems), pest (termite) inspection, swimming pool inspection, roof inspection, foundation and soil inspection. These inspections are necessary to reveal the defects, if any, so that you are fully aware of what you are dealing with after you buy the house. Sometimes, all defects are not revealed in the seller’s disclosure statement. Depending on the terms of the Deposit Receipt, you, the buyer, may request the seller to fix the defects or to provide funds that you may do so after the escrow is closed. You should choose competent inspectors and someone you trust, like your agent, should be present during the inspections. Source Capital requires a pest and roof inspection before the loan deal can be closed.

Title Report and Insurance

In California, the title of the property is searched by a company, which provides a preliminary report on the condition of the title for the buyer’s approval. The report includes information on present ownership, legal property description, any existing liens, easements, and other conditions, covenants and restrictions. A title insurance policy will be issued after the close of escrow. The title insurance policy insures the buyer’s interest in the real estate, along with the validity of the loan. The police act as a contract to protect the buyer against any loss through defects in the title.

Approval of Loan

After the buyer applies for loan, he needs to submit all the necessary documents for the assessment of his finances, taxes and the property he intends to buy. After the documents are processed and underwriting is complete, the money lender delivers the contract, underwriting and others to the escrow holder. The escrow agent ensures that the buyer has signed all the documents, and the seller signs the Deed a few days before the loan is closed. The buyer delivers the down payment to the escrow holder, and the seller transfers his down payment to a local bank before escrow is closed.

Close of Escrow

After all the terms are fulfilled, the escrow is closed and the Deed of Trust is recorded with the County Recorder. The escrow company notifies the buyer’s agent that the title is recorded and hence, the property officially belongs to the buyer. There is no need to have a final meeting as all the documents have been duly signed. After the escrow is closed, the involved parties will be given a settlement statement that will show the credits and charges for each party.

Source Capital makes sure that all these processes go as smoothly as possible. We work along with the buyer so that there is no possibility of disagreements. Our legal counsel in California ensures that all documents are up-to-date and authentic. For more info please Contact Us or call us now at 858.705.6144.