Hard Money Loans FAQ’s
FREQUENTLY ASKED QUESTIONS ABOUT HARD MONEY LOANS
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. Sometimes they build new properties or hold properties as rentals.
Real estate investors use hard money when they are unable to or do not have time to obtain financing from more conventional sources. Typical banks won’t fund these properties because of condition or the fact that a full-time investor isn’t typically W2 employee.
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. We only do non-owner occupied and business-purpose loans.
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 but not vice-versa. Experience is great but not necessary. The Norris Group is constantly finding and helping new clients so first-time investors are encouraged to apply!
At the end of the day, these are business loans. We want you as the borrower to succeed as well as our private money sources. When all parties are happy and successful, all tend to come back for more and we all enjoy a long-term and profitable relationship.
A note on the market: In our current 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 these concepts, has been the biggest and most common mistakes we’ve seen over our many years in the business (not to mention costly).
As an example of understanding your market: How much have prices declined/increased? Have you factored in holding time and costs into your offer? 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? What level of repairs is required to maximize profits? 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 letter of credit will be issued to those who qualify. However, this is not a commitment to fund any transaction at any certain amount. Nor is it a “proof of funds” letter.
Amount of the letter of credit will range between $200,000 and $1 million dollars. The 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. If you do not hear back from someone within 48 to 72 hours please feel free to call the office at 951.780.5856.
California and Florida. In 2016 we started lending more in Northern California. Have a question, just call at 951-780-5856.
Our can close in as little as 5 business days assuming we have all documentation signed correctly and returned in a timely manner. Lead times may vary by loan program (longer-term and construction loans typically take longer).
Quick closings are possible only with your help! We need all the documentation, escrow instructions, proof of correct insurance, clean preliminary title report, and all docs signed correctly and timely for us to close quickly for you. Speed for your transaction is very dependent on your response time!
Each transaction is handled on a case by case scenario. If there is a special requirement, we may be able to accommodate you but tell us up front what you need on a timeframe.
The Norris Group specializes in non-owner occupied residential, single-family properties from 1-4 units. Our programs range from a standard fix and flip to buy to hold as rentals to new construction. However, if you have small apartment buildings, please give us a call, we may be able to assist you. These are business purpose loans.
We DO NOT offer funding for mobile homes, commercial, or cannabis projects.
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. We’ll likely need to see more cash on hand.
The Norris Group may roll some of the repairs into the loan. In today’s market, borrowers will have approximately 20% in the deal by way of down payment and fees associated with the loan. If the loan is a construction loan, the borrower will own the lot free and clear as well as have plans and permits approved and completed.
All loans are subject to change as the market shifts. It is our goal to make both the private lender and borrower successful in every transaction. Our reputation of accomplishing this goal has allowed us to continually grow, even in tough markets.
Yes we do! This should not be confused with trustee sale financing which we do not fund directly. We do not have the ability to give you cashier checks to take with you at live auctions.
For standard auctions like Auction.com, Williams and Williams, and Hudson and Marshall, THE NORRIS GROUP CANNOT GUARANTEE FUNDING FOR YOUR PURCHASE. It’s best to submit an online loan application 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.
In addition, every auction company is a little different and protocols change. You will need to find out what each individual auction company requires before the auction. 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 as long as we’re informed immediately of the intent to fund.
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, even suggest you walk away from your deposit.
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. Know your numbers!
No and never. The Norris Group only funds on non-owner occupied inventory and these are business purpose loans. You will be signing loan docs that state you will not be living in the property.
On some programs, yes. Our fix and flip and new construction products do not have a prepay penalty. For our Rental Purchase and Refinance Programs, there is a prepay. Please see specific programs for more details.
No. The number of inquiries we receive on a daily basis prevents us from processing these requests. We 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.
Once you have a deal under contract and send in the full loan application, 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. Call 951-780-5856 and ask for the seminar department.
Most agents and auction companies are familiar with letters of credit from hard money lenders. If for some reason you have trouble, have the agent or auction company call our office during regular business hours. Our loan officers have had this particular conversation many times and typically 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, 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 letter of credit.
If this is the case, we highly recommend several things:
1. Cash is king. 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 profitable. An investor can increase liquidity and cash availability via partnerships, credit lines, or simply saving.
2. 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.
3. 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. See our list of real estate investment clubs.
4. 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.
5. 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 list of real estate investment clubs for a club near you.
The Norris Group does fund trustee sales by way of refinance. Leverage is a great way to increase your buying power.
The Norris Group does not give investors money to purchase at the court-house steps. Instead, once an investor is the winning bidder on a property at trustee sale, the investor should fill out a complete loan application on our website immediately. This allows us to open escrow so when the trustee’s deed is obtained by the investor, funding happens in a few business days.