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Common Hard Money Lending Terms

Getting started in real estate investing can present you with a whole new vocabulary. Luckily, we’ve compiled the following list of industry terms which you are likely to hear if you jump into the hard money/ real estate investing space.

Terms:

After Repair Value (ARV) – This is an estimate, based on comparable properties near the subject property and the value of the home after it has been renovated using the rehab list and budget.

Appraisal – A professional assessment to determine the estimated current market value of the property as well as the worth after the renovations are completed.

As-is Value – The value of a property as it exists now, without any renovations or improvements.

Bridge Loan – Short term financing which bridges the gap until another financing, typically traditional financing, is acquired.

Collateral – This is a property or other assets that a borrower offers as a way for a lender to secure the loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses. Hard Money Lending is asset/ collateral-based lending.

Commercial Use – A property that is only for business investing purposes and will not have the owner of the property living in it.

Default – Failure to comply with the terms of an agreed-upon loan, including timely repayment.

Distressed Properties – Properties that are in extremely poor condition (possibly even in foreclosure). These properties are great contenders for fix and flip investments.

Draw Schedule – A -re-payment plan for construction or renovation projects. Typically, an inspector will determine the scope of work completed using the rehab list, and the lender will distribute the funds based on that value of the work completed.

Exit Strategy – How the borrower plans to pay off the loan. It’s also important to the lender that the project will also turn a profit. Examples of exit strategies include selling the property and refinancing traditionally.

Fixed-Rate Loan – A fixed-rate loan is a loan in which the interest rate or scheduled principal and interest payment amount does not change throughout the course of the loan.

Guarantor – A person who agrees to take responsibility the loan and for any remaining owed amounts on a loan should there be any.

Hard Money Lender – Hard money loans are a specific type of asset-based loans that are secured by real estate collateral. Hard money loans are generally given through private investors or companies.

Interest Rate – The amount (a percentage) that a borrower has agreed to pay a lender as the price of borrowing money. Typical interest rates for Hard Money Loans are between six and thirteen percent.

Loan Management System (LMS) – The intuitive Broker Loan Management System from Bridge Loan Network digitalizes the process enabling brokers to upload and store their client’s information once for multiple lenders to review.

Loan Origination System (LOS) – Loan origination is the process where a borrower applies for a loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds. The loan origination system is an online portal where lenders can process loans, upload documents and communicate with the broker or borrower.

Loan Points – An origination fee. One point is equal to one percent of the principal loan amount. Typically, Hard Money Lenders earn between 1 and 3 points, and brokers can match the lender with points.

Loan-to-Value Ratio (LTV) – The loan amount for the property divided by the appraised market value of the property.

Mixed Use – A property that has both residential and commercial aspects in it.

Prepayment Penalty – A fee added to the loan for paying off the loan before the agreed end date.

REO (Real Estate Owned) – A process where ownership of the property was transferred from an original owner to the owner’s lender through the foreclosure process.

Referral Fee – A fee paid by one Private Money Lender to another for referred business.    Referral fees are common for commercial loan transactions between hard money lenders, brokers and investors.

Refinance – Replacing an existing loan with a new one. Typically, investors refinance to get a lower interest rate on their loan and/or to leverage real estate value for cash to invest again.

Return on Investment (ROI) – A measure used to calculate the success of an investment. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The ROI is expressed as a percentage or a ratio.

Scope of Work – This is an outline of all the renovations scheduled to be completed before the house is sold, as well as their anticipated costs. Typically, this is considered with the renovation list when applying to a Hard Money Lender.

Protection of our Clients Information at the Forefront

Data ProtectionIn our industry, both in the private lending and financial technology industries, client and data protection are top of mind for both the company and customers. This is never more true than when dealing with someone’s book of business and their specific clients they have worked so hard to acquire. This is even more important when working with both someone’s business and personal information.

At Bridge Loan Network we take the protection of our client’s information seriously and our team has worked hard to create a secure network for all our users, including brokers, direct borrowers and lenders.

To ensure our broker’s client’s information is protected, as well as the broker client relationship, all approved and vetted lenders on our network are required to sign our Lender Agreement. This agreement states that if there is a broker who has brought client to a lender, the lender is required to work directly with the broker on the deal, and never go directly to the broker’s client. This of course can be amended if the broker gives permission for the lender to speak with the borrower about the specific scenario or application.

As a lender on our platform we promise that any client, either broker or borrower, who comes directly to you for funding will always then be assigned to your company through our lender relationship algorithms. You will always be the first to know if your client has submitted a loan request, and if it’s something that is outside your scope of lending, you have the option to refer the deal to our Marketplace Portal.

Our Marketplace Software also uses relationship algorithms to protect brokers from having past clients circumvent them by going straight to a lender in our system. Any loan that comes in from a past client who has previously come into our system through a broker, will always be assigned to the broker’s company. This will also trigger an alert to you as the broker, to let you know that your client has submitted a new loan request in Bridge Loan Network.

Bridge Loan Network values the relationships that brokers and lenders develop with their clients, and we want to protect our brokers and lenders by ensuring that their clients stay their clients.

If you would like to learn more about our Marketplace Portal or Loan Management System, please contact a member of our Bridge Loan Network Team today!

Is Your Current Process Killing Productivity?

Simply stated, how your lending process is structured holds a significant role in how efficient, compliant and quick your organization is in processing a loan from application to closing.

Quite often we meet individuals whose main form of a “Loan Origination System” or “Loan Management System” is with many, many excel files and back and forth email chains.  But what happens when a file is deleted, or an email chain becomes so long you can’t find the information you need for the loan file? By having one secure location each team member can access for all loan documents and pertinent information is how you can bring your lending business to the next level.

We’ve built our Loan Origination System (LOS) and Loan Management System (LMS) based on feedback from other lenders and their processes, so we could help streamline them. With Bridge Loan Network’s LOS, we can integrate your loan application right into our software. Additionally, your brokers and borrower can do more than just apply for a loan. They’ll be able to add in required loan documents and authorize a credit and background check before you even look at the file. You’ll also be able to track the loan from beginning to end, without the use of paper documents and excel files.

See the difference for yourself, give Bridge Loan Network a call (860.432.9700) to learn how our Loan Origination System and Loan Management System can improve your lending process.

Bridge Loan Network’s Referral Program

Referrals Welcome!

Let’s Grow Our Businesses Together

Bridge Loan Network has developed a Referral Program that serves as a centralized location for real estate investors, contractors, REO Agents, and other members of the real estate industry to find hard money financing for their clients and receive a commission for the referral.

The premise of the Referral Program is simple. Our web developers at Bridge Loan Network will set you up with your own web application link where we can track the loans that come through so you can receive a commission for the closed loans. Then once your personalized application link is created, you can either direct people to apply by sending the link, or by adding a button to your website.

We also suggest adding a small amount of text around, or below the application link to help visitors on your site know where to apply for the hard money loans. Two examples our current Referral Program Members are using are below:

“The Fastest Route Between Loan Application and Closing for Hard Money Deals. Apply for a Loan Today!”

“We provide hard money loans and commercial lending options for real estate investors with competitive rates and terms. Apply Now.”

Pro tip: Don’t have a website? We can still build you a personalized Referral Application page that you can send to your clients in order to get deals in!

Benefits of the Referral Program:

How the Referral Program Works:

  1. Bridge Loan Network creates your own personalized Referral Application Link
  2. Add Referral Application Link to current site or send directly to clients looking for funding
  3. Loans submitted will be sent to industry leading private lenders on the Bridge Loan Network Software
  4. Lenders will contact applicant’s directly to process the loan request
  5. When the loan closes, you as the referral source will receive a commission on the deal
  6. Repeat and earn easy referral commissions!

Apply to become a Referral Program Member today!

Benefits of Adding Tech Upgrades to Your Next Investment Property

Many real estate investors are seeing an increasing demand to add technological or “smart” upgrades to their projects. This is attributed to both an increase in desire from prospective tenants or homeowners and to the additional value, these smart upgrades add to the properties.

According to Consumer Reports, smart home features can boost your home’s resale value by 5% and a survey of Realtor’s showed that 42% of clients were interested in smart home devices. Investors can target this market by incorporating smart upgrades to their investment properties.

Below are smart home benefits for both investors and buyers/renters:

Smart Homes are Safer

The most common smart home add-on is a security device. This can include the use of cameras and sensors that can detect a break-in, smoke, fire, carbon monoxide, moisture levels to detect flooding and other items to keep you and your property safe. Smart home security devices can even be as simple as a smart lock, where you can lock your front door with an app on your phone. You’ll never have to wonder now if you forgot to lock up for the day, whether it be your primary residence or flip project. Both of these devices will not only be a selling point for prospective home-buyers but also give landlords a peace of mind about the safety and security of their properties.

Smart Homes Save Money

Smart thermostats allow you to control the temperature in your home at all times, including when you are not on the property. According to a recent study by Nest, a smart thermostat company, smart thermostats can save homeowners an average of 10%-12% on their heating bill and an average of 15% on their cooling bill, which can translate to over $170 saved in a year. Saving money is a huge selling point for many buyers, and as a landlord, you can factor these savings into the total rent cost maximize profits.

Remote Monitoring

With these new smart home devices listed below, home-owners and landlords can keep an eye on their property at all times. Now as an investor you don’t have to check in on a vacant property or your current flip project every day to ensure there is no flooding, freezing pipes, break-ins, etc. Now you can check your phone and connect to the smart devices on the property. Giving landlords, investors, and home-owners a peace of mind.

Types of Smart Upgrades:

Smart Thermostats

Source: https://store.nest.com

“The Nest Learning Thermostat was the first thermostat to get ENERGY STAR certified. It learns what temperature you like and builds a schedule around yours. And independent studies showed that it saved people an average of 10% to 12% on heating bills and 15% on cooling bills.”

Smart Door Locks

Source: http://august.com/products

“Lock and unlock your door, control keyless access, and keep track of who comes and goes, all from your phone. They’re discreet and can be installed inside of your door, so your door’s exterior hardware does not change. Use your existing keys any time.”

Moisture/Temperature Sensors

Source: https://www.wallyhome.com/

“Receive instant alerts via text, phone call, email, and push notifications on your mobile device when a water leak is detected, a temperature or humidity reading is outside a desired range, or if a window is left open.”

Video Doorbell

Source: https://ring.com/

“Ring lets you adjust your motion sensors so you can find the ideal setting for your home. You’ll get instant alerts when motion is detected, allowing you to protect your property from the comfort of your smartphone.”

 

Bridge Loan Network is a leading, online portal in the asset-based lending space. By providing a centralized platform for submitting deals, Bridge Loan Network is technology that connects the private lending industry. 

 

Do you have any other smart home devices you would recommend?  Share your recommendations in the comments!

Bridge Loan Network Exhibiting at the 2018 Real Estate Symposium

A Team from Bridge Loan Network will be exhibiting at the 2018 Real Estate Symposium presented by Green River Capital, Red Bell Real Estate and ValuAmerica. The Real Estate Symposium, which is taking place February 28th through March 2nd at the Grand America Hotel in Salt Lake City, Utah is a nationwide leading conference for REO experts.

In addition to ample networking, Bridge Loan Network will also be registering attendees for our White Label Websites and Web Application Integration Plug-Ins.

White Label Website Benefits:

Already have a website? Then we can provide the Web Application Integration Plug-In which is a Loan Application plug-in for your website that connects to our Loan Origination System.

Web Application Integration Plug-In Benefits:

The White Label Website or Web Application Integration serves as a loan portal and offers simplified loan entry processes for you and your clients.

To learn more about the White Label Website and Web Application Integration Plug-in, stop by Bridge Loan Network at Booth #1 at the Real Estate Symposium or contact us at info@BridgeLoanNetwork.com.

Exciting New Software Features

As you know, our system has the ability to track your client’s loan from beginning to end. However, we are constantly striving to add more features in order to decrease the amount of work involved for all parties and increase closing efficiency. That’s why Bridge Loan Network is excited to introduce our newest feature, the ability to pull credit history!

The credit check is good for 90 days. What that means is your client’s credit doesn’t have to be ran multiple times by multiple lenders. Bridge Loan Network will run the report once and keep it safe and sound on our system for 90 days so it can be seen by the multiple lenders on our site. One credit check means not only will your client save money, but it will help to maintain their credit score.

Lenders, when we say browse completed loan packages, we mean it! This feature allows you to quickly determine if the borrower’s request meets your criteria. It also saves you time, no more asking for, or waiting around for credit scores to be checked. It’s all right here, in our loan origination system!

Lastly, payment for the credit check is also processed through our system allowing you and your clients to truly keep all documents in one, safe spot. Join us today if you’re looking to introduce a new way of closing hard money deals to your clients. Contact us for help getting started.

Bridge Loan Network Lending Portal

 

The Bridge Loan Network lending portal is robustly unique. With just a click of a button brokers can submit loan packages that can be viewed by multiple lenders. Lenders, these deals must be fully completed before they are let into our portal meaning you don’t have to waste your time tracking poor leads. Our goal is to help lenders and brokers come together to get deals done, so we’ve put together this list of tips for how to best utilize our platform to be profitable.

Brokers:

Take a look at the list of items needed for 24-hour underwriting. Once you have these documents ready to go, head to the lending portal and submit the paperwork. The best part is, you only have to submit the loan package once and then it can be viewed by multiple lenders.

Like we said, our system is robust. The more information you provide, the better chance you have at capturing a lender’s attention. Make sure you are as thorough as possible. Include as much information about the loan request as possible. For example, don’t forget to specify the loan type, amount, purchase price and very importantly the borrower’s contribution and credit.

Lenders:

Time is money. Don’t wait for opportunities to come to you or waste time looking at poorly sourced deals. Log in daily to see multiple broker-submitted loan packages all in one place. Choose deals that are right for you and streamline your internal process. No more searching for paperwork, or requesting last minute information. Everything you need can be quickly accessed anywhere you have an internet connection.

Contact us today to demo our software and to learn about the features that can reduce your work load to make you more profitable!