Below are the parameters within which Financial generally works.
Loan Size
Our niche is from $50,000 to $3,000,000. Can Forrest Financial arrange financing outside of our niche? Certainly. Under the right circumstances and for the right borrower, we can arrange loans as large as $10,000,000.
Property Location
We focus on Colorado and the Rocky Mountain Region, but our relationships give us the ability to arrange financing for property located throughout the US.
Property Type
We can arrange hard money loans for all types of real estate. Vacant land is the most difficult to finance today because of the difficulty in determining value and identifying the exit strategy. New development is limited, and the market for raw land is practically non existent in many areas. Some raw land deals are getting done but at very low LTVs.
LTV (Loan to Value)
The LTV on most loans that get funded today will be in the 50-65% range, particularly for commercial real estate because it appears we haven't yet reached the bottom in a declining market when looking at the nation as a whole. It is possible to get higher LTVs, 75-80% in some instances, if we can get comfortable that the market for a particular property has bottomed and is on the incline or the property is in a niche market area.
Loan Term
Typically the loan term will not be longer than 2 years. This works for most borrowers since hard money is definitely more expensive than conventional financing and is used temporarily until conventional financing can be arranged or the property sold. However, extension clauses can be inserted into the loan documents that allow the borrower to extend the loan beyond the maturity date if the loan is performing and circumstances with respect to the borrower and the property have not changed substantially from the time the loan was initiated.
Interest Rate
Hard money rates today generally range from 10-16%. Rates vary according to the lender, property type, property location, borrower, etc. Forrest Financial is on the lower end of that scale. Rates are also a function of the market. Today there is a shortage of mortgage money in general, and those lenders who do have capital available can command premium rates. As the general economy recovers, rates should come down unless inflation kicks in.
Origination Fee
Origination fees are typically 2-6 points. Again, depending on the borrower, property, location, etc. Other charges are nominal except when it comes to larger loan amounts where third party expenses (appraisal, environmental, legal) could amount to several thousand dollars.
Timing
Realistically, it is going to take 2-4 weeks to fund a loan from the time borrower submits a request. Smaller loans are generally the quickest and easiest to get done. Larger loans usually take longer because there are more parties involved. Since the real estate bubble burst, all lenders are taking a harder and longer look at every request than was the case a couple of years ago during the go-go days. Can a loan get funded in a few days? Yes, if our desk is clear, the borrower has all the information needed immediately at hand, the property is free of any peculiarities and the loan request is not pushing the envelope with respect to LTV, term, interest rate, etc.