real estate finance - full book (500 pgs)

Equity based loans equity loans are loans that cover

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Unformatted text preview: ncome to defraud the government, small business owners frequently jeopardize their position when conventional lenders will not grant them purchase or equity loans because the small business owners lack the capacity (on paper) to repay the loan. ASSET BASED Loans are secured by real property. The value of the real property is the paramount criteria for making the loan. Dynasty School (www.dynastySchool.com) 6-3 REAL ESTATE FINANCE The lender, while generally preferring performance from the borrower, wants to know that in a worse case scenario (foreclosure) he or she is protected. The following factors are of far lesser importance. POOR CREDIT A history which indicates problems in the past will deter most conventional lenders. Since hard money makers are primarily interested in the security, many will make loans in cases where the borrower appears risky and even likely to default if the property value warrants the loan. Some hard money lenders are also dealers in real property. These lenders will make loans in situations where they would be delighted if the borrower defaulted and they ended up owning the property. CREDIT DISCLOSURE Even though a loan may be based on asset value, the arranger of hard money loans has a duty to protect and fully inform lenders and borrowers. Credit of a borrower must be checked out. Assuming that a borrower has financial strength based on his or her possessions and lifestyle could result in loan broker liability. The normal procedure is to obtain a TRW–type credit report from a credit reporting agency. If the report is insufficient, such as no reported credit history, the loan arranger should request an investigative report. The credit information must be disclosed to the lender. PURCHASE MONEY LOANS Purchase money loans are loans to purchase real property. It is an equity based purchase loan. Most purchase money loans are made by institutional lenders who offer significantly lower loan costs and interest rates. Some of the reasons hard money arrangers get involved in purchase money loans include: Property Type – Most institutional le...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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