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Unformatted text preview: nders are not interested in loans on raw land or lots. It is often difficult to obtain loans on special purpose 6-4 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 6: HARD MONEY LOAN & CONVENTIONAL LOANS
buildings or properties which are considered distressed for a variety of reasons. Capacity – Due to outstanding debt or low income, a person might not meet the proper ratio requirements of income to debt service costs. In reality, people can often afford what they want. In Orange County, many people pay over 50% of their income to be able to live in a desirable area. Ratios are more likely to be used as a guide by hard money lenders rather than as a rule that has been cast in stone. Credit – Prior credit problems because of personal problems or just neglect disqualify many buyers from conventional loans. Hard money lenders are less likely to be concerned with minor credit problems and sometimes they are not terribly concerned with major problems. EQUITY BASED LOANS
Equity loans are loans that cover a property owner's equity. Equity is the difference between all of the liens and obligations against a property and the fair market value of the property. The majority of hard money loans are equity–based loans.
For reasons covered under purchase loans, borrowers frequently cannot obtain equity loans from conventional lending institutions. In addition, appraisals by lending institutions have changed. At one time, appraisals were very much on the optimistic side when lenders wanted to increase loans at the expense of greater risk. The savings and loan industry suffered from loose lending with foreclosures and eventual government bailouts to protect depositors. Today, many lenders have gone the other way and prefer to use very conservative appraisers. Some lender appraisals may vary significantly from appraisals commissioned by a loan broker. LOANS IN EXCESS OF EQUITY (125% MORTGAGES)
These are second mortgages th...
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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.
- Spring '10