Answers to Borrower Questions
What documents are required from the borrower?
- Pertinent property information, like purchase agreement, location, tenants, rent roll, building square footage, land area, cost, improvement budget, and operating statement.
- Physical property inspection by lender.
- Digital photos, if available.
- Personal Financial Statement with real estate schedule.
- Personal tax returns for the previous two years.
- A signed Credit Authorization. We will order the borrower’s Credit Report.
- If the borrower is a corporation, LLC, or partnership, all the necessary financial statements and tax returns, as well as entity documents. In addition, we typically require personal guarantees.
What makes The Loan Company unique as a private lender?
- We are a Limited Partnership and a direct portfolio lender. No outside investors or lenders are involved in our underwriting or management decisions.
- Borrowers deal directly with the decision makers.
- We quote a loan rate and terms usually the day of inquiry and can close a loan within several days of the loan request.
- We do not charge upfront fees. We only get paid when we perform.
- We can creatively structure a loan in “out of the box” situations to accomplish a borrower’s goal.
- We typically do our own in-house appraisals.
- We do not charge interest on undisbursed funds.
- Our pricing is competitive, fair, and consistently at the lower cost range for private money in San Diego.
- Our loan quote is our commitment. There are no bait and switch tactics.
How is a Line of Credit used to buy and sell properties?
A Line of Credit (LOC) is best used for a borrower who is purchasing and selling multiple properties in a short period of time. A LOC is a commitment secured by various properties as they are bought and sold, allowing the borrower to use the loan commitment multiple times during the loan term (usually 12 months) without paying additional loan fees beyond the initial cost for the loan commitment. Each loan disbursement within the LOC is individually underwritten and secured using our typical loan underwriting guidelines. The only additional cost would be $395 for each additional property secured by the LOC through a loan modification, plus the title insurance and recording fees for each trust deed recorded.
How does cross collateral benefit the borrower?
A borrower who is short on cash and has spendable equity in other properties that is less than 65% LTV may use that equity like cash for a down payment to purchase or refinance another property. For example, when the leverage is too high on an individual property for a straight refinance, the additional spendable equity from another property or properties may be cross collateralized and used like a cash pay down to satisfy the underwriting guidelines.
Does The Loan Company make Second Trust Deed loans?
Yes, but only on a selective basis and subject to the following:
- The First Trust Deed must be of a size that The Loan Company would fund if it were to have made the loan initially.
- The Loan Company must be comfortable with the overall Loan-to-Value Ratio including the First Trust Deed loan commitment and the Second Trust Deed.
- If the property is a rental property all the debt (including both the First and Second Trust Deed) must be serviced by the net operating income with an acceptable debt service ratio.
Does The Loan Company make loans to borrowers with bad credit?
As a rule, we make loans to borrowers who are administratively responsible and satisfy their debt obligations in a timely manner. We do not make loans to borrowers who are chronically delinquent on mortgages and who do not pay routine debt obligations on time.
However, there are some situations when we look past the bad credit score and find out more about why the borrower’s circumstances led to bad credit. Bad credit will not negate a good loan to a good borrower on a good real estate investment.
How does The Loan Company determine the interest rate?
Our rates are determined by a combination of economic conditions, market competition, riskiness of investment, and value of service (speed and creativity) provided to our client.
What guidelines does The Loan Company use to determine loan amount?
We utilize common sense guidelines for determining the loan amount, for example:
- Loan-to-Value Ratio in the 60% to 75% range, depending on the property type.
- Whether the Net Operating Income can adequately service the debt.
- Loan-to-Property Cost at a maximum of 75%, depending on property type.
Does The Loan Company always use a third party escrow?
Yes. ALTA Title Policy will be issued along with associated required endorsements applicable to the type of loan funded.
Where does money come from to fund borrowers’ loans?
The Loan Company of San Diego is a Limited Partnership comprised of approximately 350 partners with over $159,000,000 in capital. We also use a small line of credit to manage cash flow. The Loan Company maintains sufficient liquidity in order to meet both Limited Partner and borrower demand.
Can a borrower with little or no cash secure a loan to take advantage of an investment opportunity?
A borrower who has spendable equity in other investment properties may leverage that equity to generate a larger loan than originally available on one specific property. The additional equity may be used like cash down. The additional collateral must have sufficient equity, and when combined, the overall Loan-to-Value Ratio and debt service coverage must be acceptable.
How is it possible for The Loan Company to close a loan in a matter of days?
- We respond quickly with due diligence.
- We are the decision maker who approves the loan.
- Minimal borrower information is required.
- We are local and typically do not need a full appraisal on the property.
- We have excellent relationships with escrow and title companies.
- We prepare and process all loan documents in-house.
- We arrange loan signing with an in-house notary.
- We wire funds directly to the title company that coordinates with escrow to fund the loan.
Does The Loan Company Make No Doc Loans?
On occasion we will make a No Doc loan, also known as a hard money loan. In these instances, we look primarily at the property pledged as security for repayment in the event of default. Fees, costs, and interest are greater, reflecting the increased risk to us.
What fees are charged by The Loan Company?
- The Loan Company charges a fee for loan origination, extension, or assumption; a fee for loan documentation or modification; and a fee when loan documents have to be re-drawn.
- Origination fees range from 1% to 3% depending on whether it is a new loan, a modification, an extension, or an assumption, and whether there is a prepayment penalty.
- A loan documentation fee is typically $695 for new loans. A loan modification/extension/assumption fee on existing loans is $395. When we have to re-draw loan documents the fee is $395.
- All fees are payable at closing.
- Fees are subject to change for more complicated transactions with higher assessed risk.
- Other fees charged are third party costs collected by The Loan Company and remitted on behalf of the borrower. Examples of third party fees are escrow, title insurance, tax service, recording, legal, wire, environmental, and appraisal.
Does The Loan Company charge upfront fees to underwrite a loan?
We typically do not charge upfront fees. However, on larger, more complicated loans when third party vendors are required, an upfront deposit may be required. These fees are applied to the loan costs when the loan is funded. If the Loan Company elects not to fund the loan, the deposit is returned to the borrower, less the third-party fees.
Does The Loan Company work with Brokers?
Brokers find The Loan Company to be an excellent source for small-to-midsize commercial real estate loans in San Diego County. The Loan Company offers bridge, construction, and permanent loans with quick decisions, competitive pricing, and flexibility, making it convenient for both the broker and their client. We accommodate borrowers’ unique loan requests, allowing brokers to close more deals. We have been serving San Diego County since 1974, which gives brokers added assurance we can come through for their clients.
It is our experience that once brokers realize the benefits we have to offer as a lender, we gain a long-term relationship.