Hard money loans offer a quicker transaction than you’d get with conventional mortgage lending. The requirements for a loan are simple, as well, and the closing process is typically going to be much easier because there is much less paperwork involved. In order to make sure that the process goes as smoothly as possible, you should prepare yourself and know what to expect at the closing table.
The hard money closing process can involve the following types of documentation:
Promissory Note
This is a simple agreement of the payment terms of the loan, including dates and amounts of payments agreed upon. There will also be rules regarding how the trustee operates on both the lender and borrower’s behalf. It is essentially an IOU from the borrower to the Lender.
Mortgage
Often, people refer to a loan as a “mortgage,” but a mortgage is not actually a loan. The mortgage is a contract between the borrower and the investor, which pledges the property as collateral or security for the loan.
Closing Statement
This statement is required by federal law, and will disclose all of the fees and costs associated with the transaction. It is designed to make sure that all payments, costs, and title fees are transparent and there is less confusion regarding costs. This standard form is used in every real estate transaction, as required by federal law.
Personal Guarantee
Not all commercial loans include a personal guarantee, but this document is far more common to see in a hard money loan. This document simply states that the borrower promises to personally repay the loan should the cash flow from the property or sale of the collateral fail to repay the loan in full.
You should always know what you are signing at the closing table, and especially in the case of a hard money loan. If there are documents besides these you don’t understand or if you have questions, you should consult with your attorney for an explanation.
H&O Capital Funding has helped countless real estate buyers, sellers, lessees and lessors achieve their goals. Our legacy is unwavering commitment to the communities we serve. Houlihan & O’Malley Commercial Real Estate Services specializes in four distinct, yet overlapping, areas of business: Commercial Brokerage services, Private Mortgage services, Appraisal Services and Advisory services.
For more information on loans that we offer, visit our website.
