A loan term sheet aims to provide loan applicants with a sense of the parameters and terms involved in the loan they are asking for. Understanding a hard money loan term sheet might be tough for new hard money lenders. A lending document contains several key conditions. If you wish to succeed as a hard money lender, you must be familiar with the following terms:
- ARV or After Repair Value: This is a property’s value after repairs have been completed. Calculations can be used to determine the value when comparing sales from the previous 180 days.
- Purchase Price: The purchase price stipulated in the contract.
- Repairs: This is the contractor’s bid or scope of work for achieving the ARV value.
- Loan Amount: It’s the total amount borrowed for purchases and repairs.
- LTV or Loan to Value: It’s the ratio of the loan amount to the ARV.
Below are some other terminologies involved in the lending process that a hard money lender should be familiar with:
- The lender: Every lending process relies on the lender for its success. A lender is a person who lends money to a person or a business in the hopes of being paid back.
- Per Diem Days: The days remaining in the closing month
- Points: The origination fee for securing the loan
- Personal guarantee: It occurs when a person accepts personal accountability for a debt.
Non-owner-occupied loans only, insurance, title policy or insurance, and tax certificates are some of the other terms used in the lending process. Lending conditions can be difficult to comprehend, but this is why we are here to help you navigate the document and make the process of getting a hard money loan as simple as possible.
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