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Hard Money Frequently Asked Questions
Below are some of the most frequently asked questions we get about hard money loans at The Norris Group. You may also find our hard money informational video helpful in understand how we operate. Click a question below to reveal the answer.
Hard money (also known as a rehab loan or bridge loan) is the term used for loans funded by private parties who want a safe and high return. The Norris Group is a broker who arranges loans for and sells notes to private investors. We work directly with property buying investors who use these funds to purchase properties with the intent to fix and sell them for a profit in a very short period of time.
Real estate investors use hard money when they are unable to or do not have time to obtain financing from more conventional sources.
There are many types of hard money loans. The Norris Group specializes in purchase money first trust deeds to investors who purchase homes at a substantial discount. The Norris Group will do loans on units. Construction loans will be considered based on the individual deal and existing market conditions. The Norris Group does not do owner occupied or commercial loans.
Yes. See Question 3 for the process.
It's really simple. All you have to do is click on the Hard Money tab on our website and then click on Loan Application.
Fill out the required information. Make sure you complete the information requested, especially the approximate credit score and funds available. Available funds may include cash on-hand, credit lines, maturing cds, and stock accounts with borrowing power. Not included would be small balance credit cards, IRAs, and other people's money.
If you have a specific property for which you are interested in obtaining a loan, make sure you include the information so that when you speak with Craig Hill, he will be aware of the urgency of your request.
Once you submit an application, please follow up with a phone call to The Norris Group. Upon approval, you will be given a "Proof of Funds" letter. This letter in most cases will be treated the same as cash.
The Norris Group first and foremost wants to make sure you have a positive outcome on your transaction. We will review your ability to repay, credit-to-debt ratio, cash reserves, the area in which you plan to invest, and also your experience level.
Larger cash reserves can overcome lesser credit and lack of steady income buAddt not vise-versa. Experience is good but not necessary. The Norris Group is constantly finding and helping new clients.
First time investors encouraged to apply!
A note on the market: In a declining market, investors must be familiar in the area in which they plan to invest and understand how to successfully approximate future value of the property as well as home repairs. Not knowing, or understanding this, has been some of the biggest and most common mistakes we've seen over our 10 years in the business (not to mention costly).
As an example of understanding your market: How much have prices declined? How much of a decline are you factoring into you holding time and purchase price? How much has sold in the area recently? What percentage is pending, sold, expired, and active?Out of the solds, why did they sell? What price will you get when you sell? If you don't know the answers to these questions, we highly suggest doing more homework or do some training to better understand how to arrive at these answers.
Yes! Upon review of the application, a general "Proof of Funds" letter will be issued to those who qualify. However, this is not a commitment to fund any transaction at any certain amount.
Amount of the proof of funds letter will usually range between $200k and $1 million dollars. Amount will be based on experience, ability to make monthly payments, and in a large part, on the client's cash reserves.
People who do not qualify will be contacted and suggestions made on possible solutions to various issues. See also Question 18.
If you do not hear back from someone within 48 to 72 hours please feel free to call Craig at the office.
The loan is a one year interest only note at 12.5% with payments due monthly. At the end of one year the full amount is due and payable in full.
There is no prepayment penalty on the note. The costs are 3.5 points (also known as the Loan Origination Fee), plus $850 in closing costs. There is also an up-front charge for the appraisal of $375. Client should also be aware that there are escrow, title, and fire insurance fees as well. The maximum loan to value is 65% based on after repaired value.
We only provide hard money loans in the State of California
Our average closing is 10 to 15 business days. However, if we have all the documentation, such as appraisal, escrow instructions, proof of insurance, and a clean preliminary title report, we can close in as little as 3 days. Each transaction is handled on a case by case scenario. If there is a special requirement, we may be able to accommodate you.
The Norris Group specializes in purchase money first trust deeds to investors who purchase homes at a substantial discount with the intent to repair and resell the property. The Norris Group will do hard money loans on units (1-4).
The Norris Group does not do owner-occupied or commercial loans at this time. Construction loans will be considered based on the individual deal, investor experience, and existing market conditions.
If you have a low FICO score, The Norris Group may still fund your loan but may need you to come up with more cash down to lower our loan to value. See also Question 4. as it covers other criteria that may help in your purchase.
The Norris Group may roll some of the repair and loan costs into the loan if the LTV remains under 65%. In today's volatile market, a 10% down payment is almost certain on every deal making no money down loans the rare exception, not the rule. In some cases a larger down payment may be required. Typically, in this declining market you will need to have some of your own money in the transaction, as the market stabilizes this may not be the case
Yes we do! However, THE NORRIS GROUP CANNOT GARANTEE FUNDING FOR YOUR PURCHASE. It's best to submit an online loan application and to contact Craig Hill before you go to the auction to make sure your thought process for determining property value is in line with The Norris Group’s and that you have a pre-approval letter in hand.
Investors are becoming increasingly successful at purchasing at auction (not to be confused with trustee sale).
Every auction company is a little different, and you will need to find out what each individual auction company requires. Requirements and procedures, including deposits, working with Brokers/Realtors, and percentage at closing, can change from auction to auction and even within the same company. Always read the website or auction catalog before attending.
Most auctions will require a deposit in the form of a cashier’s check ($2,500-$5,000) to bid. If you are the winning bidder, you will be required to put up money up to 5% of the purchase price. Again, this will vary per auction and will vary depending on the number of properties you purchase.
You will be responsible for the deposit to bid at auction and the down payment at the auction. Once you have purchased, typically you will have 30 days to close the transaction. The Norris Group can perform much faster than required in this scenario.
If you have made a marginal deal where we believe you are in jeopardy of losing money or our investors’ money would be at risk, The Norris Group will recommend you find another hard money lender, or in the worst case scenario, walk away from your down payment.
It is extremely important to do your due diligence when purchasing at auction as your down payment will almost ALWAYS be at risk if you decide not to make the purchase.
No. The Norris Group only funds on non-owner occupied inventory.
No. That's one of the main reasons investors work with hard money lenders. See also Question 6.
No. The amount of inquires we receive on a daily basis prevents us from processing these requests. Craig will be glad to talk to you about how you arrived at your value. However, property value and repair estimates are the sole responsibility of the investor. Knowing how to estimate properly is a critical skill for investors.
Once you have a deal under contract, we will quickly comp out the property for value before turning it over to our appraiser. If at any time we feel your value is incorrect, we will advise you to drop out of the transaction.
If you have trouble in this area, you may consider training with the Norris Group at one of our REO Boot Camps where Bruce himself will teach you how to be independently capable of making these calculations.
Most REO agents and auction companies are familiar with proof of funds letters. If for some reason you have trouble, have the agent or auction company call our office during regular business hours. Craig has had this particular conversation many times and usually the agent feels much better after they call.
Much like credit score issues, your foreclosure record alone will not dictate your application approval. The number one reason people are denied is lack of cash reserves. If this is the case, seek out a partner who may have the cash reserves but not the time or energy to find the deals. When a money partner is involved, The Norris Group will require proof of funds and a 20% down payment on the transaction. Continue to educate yourself and network.
In certain cases, especially in a down market, The Norris Group will have to err on the side of caution for our private money investor. Poor credit score, lack of experience, no past relationship, and/or marginal real estate deals may hinder us from offering a proof of funds letter.
If this is the case, we highly recommend several things:
- Cash is king in a down market. While lack of cash is part of the reason an investor needs access to hard money, The Norris Group must consider an investor's liquidity and ability to pay as promised. At the end of the day, we are responsible for our private investors' money, and we do everything in our power to keep both sides as safe and as profitable as possible. An investor can increase liquidity and cash availability via partnerships, credit lines, or simply saving.
- Fix that credit score! No excuses! We all hit bumps in the road, but this will continue to hinder your future investing endeavors if you do not address this problem. We highly recommend our good friend Philip Tirone at www.7stepsto720.com for insights into this matter. You can also catch him on our radio show.
- Do your homework. Whether you train with the Norris Group or another investment organization, knowledge is power and money. Why make costly mistakes when you can learn from those with experience and who have already made the mistakes? Talk to other successful investors in your area and see how they learned the tools of the trade.
- Find a partner. If you find yourself in the position where money will take a while to raise or you lack experience, look for other investors who might be able to use a skill that you can currently provide.
- Get involved. Check out your local investment club and stay up-to-date on trends and the current market. Investment clubs are invaluable for networking and are an unbeatable source of information. Check out our Club Resources for a club near you.
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