Hard Money Lenders Sacramento: Quick Funding Options
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Looking to finance your next property endeavor in Sacramento with a hard money loan? Whether it’s flipping a charming Victorian in Land Park or purchasing an investment property in Oak Park, hard money lenders can offer the speedy and flexible financing solutions you need. Hard money loans are ideal for projects with tight deadlines or when traditional loans are not an option due to credit issues.
This comprehensive guide will walk you through the basics of hard money lending in Sacramento, from how these loans function to their various uses and costs. We’ll also discuss alternative financing options for homeowners hoping to leverage their equity, helping you find the best path to achieve your real estate goals.
Start Making Offers Without Waiting to Sell Your Home
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private entity that offers short-term loans backed by real estate. These lenders in Sacramento prioritize the property’s value over the borrower’s financial history, making them an attractive option for house flippers and real estate investors buying rental properties.
They determine loan amounts based on the after-repair value (ARV) of the property — the estimated worth after renovations are complete. Typically, they lend a percentage of this ARV to mitigate risks.
Hard money loans often come with higher interest rates, usually between 8% and 15%, and additional fees like origination and closing costs. If the borrower defaults, the lender can take possession of the property to recover their funds.
How does a hard money loan work?
Real estate investors in Sacramento looking for quick, short-term financing, may find hard money loans to be a good choice. Here’s a breakdown of how these loans operate:
- Short-term loan: These loans are typically for 6–24 months, instead of long-term loans like 30-year mortgages.
- Faster funding option: Hard money loans can be funded within days, much quicker than the standard 30 to 50 days for conventional loans.
- Less focus on creditworthiness: Approval is less dependent on your credit score and more on the property’s worth.
- More focus on property value: The loan-to-value ratio of the property is the main criterion for the loan amount.
- Not traditional lenders: These loans are typically from private investors or companies, rather than traditional banks.
- Loan denial option: Ideal for those with substantial home equity but poor credit, who cannot qualify for conventional loans.
- Higher interest rates: These loans have higher interest rates due to the higher risk.
- Might require larger down payments: Borrowers may need a larger down payment, often between 20%–30%.
- More flexibility: Hard money lenders offer flexible terms and can help avoid foreclosure due to fewer regulatory constraints.
- Potential for interest-only payments: Some loans allow for interest-only payments initially, with the principal deferred to a later date.
What are hard money loans used for?
Hard money loans in Sacramento are tailored to meet the unique needs of real estate investors and homeowners requiring quick, flexible funding. Here are common situations where hard money loans are used:
- Flipping a house: Investors in Sacramento use hard money loans to quickly acquire and renovate homes for flipping. These loans provide the rapid funding necessary for purchasing and making renovations in competitive markets.
- Buying an investment rental property: Those looking to buy rental properties can leverage hard money loans to secure properties swiftly. This allows them to complete repairs quickly and start earning rental income sooner.
- Purchasing commercial real estate: Hard money loans offer the flexibility and speed needed for commercial real estate purchases. Investors can close deals quickly, making timely decisions to acquire profitable properties.
- Borrowers who can’t qualify for traditional loans: Individuals with substantial home equity but poor credit can benefit from hard money loans, which are based more on the property’s value than the borrower’s credit score.
- Homeowners facing foreclosure: Homeowners on the brink of foreclosure can use hard money loans to refinance or buy time to sell their home, helping them avoid foreclosure and its negative impact on their credit.
How much do hard money loans cost?
Hard money loans typically come with higher costs due to the fast, flexible funding they offer. Here’s a breakdown:
- Interest rates: Typically between 8% to 15%.
- Origination fees: Range from 1% to 5% of the loan amount.
- Closing costs: Can include various fees like legal and appraisal.
- Points: Usually 2% to 4% of the loan amount paid upfront.
Online calculators can also help you estimate these costs.
Alternatives to working with hard money lenders
Homeowners looking to leverage their home equity have several options beyond hard money loans. Here are a few to consider:
1. Take out a second mortgage: A home equity loan or HELOC offers access to your home’s equity at more favorable interest rates compared to hard money loans.
2. Cash-out refinance: This option allows you to refinance your existing mortgage, drawing out cash for new investments with generally lower interest rates.
3. Borrow from family or friends: Loans from family or friends can come with flexible repayment plans and lower interest, making them a viable alternative.
4. Use a government-backed loan program: Programs from the FHA, VA, or USDA can help with low down payments and favorable interest rates.
5. Peer-to-peer loan: These loans are provided by individual investors on platforms like Funding Circle, offering an alternative to hard money loans with different terms.
6. Specialized loan programs: Look into loans for fixer-uppers or refinancing existing investment properties to replace hard money loans.
7. Request a seller financing option: Some sellers may offer to finance the purchase directly, resulting in lower closing costs and simpler qualification processes.
How to buy before you sell
Imagine discovering the perfect Sacramento home when you least expect it — maybe a cozy bungalow or a spacious townhouse. If you want to buy a new home before selling your current one, HomeLight’s Buy Before You Sell (BBYS) program can make the process seamless.
The Buy Before You Sell program allows you to leverage your current home’s equity to make a strong, non-contingent offer on a new property. Upon qualifying, your equity unlock amount can be approved in just 24 hours with no upfront cost. This lets you purchase your next home and then sell your existing one vacant, avoiding the stress of moving twice.
Here’s how HomeLight Buy Before You Sell works:
With a flat fee of 2.4% of your current home’s sale price, the BBYS program could save you money on moving expenses, temporary housing, and potentially lower the purchase price of your new home. Furthermore, HomeLight’s BBYS fees are typically much lower than bridge loan interest rates, which are currently between 9.5% to 12%.
3 top hard money lenders in Sacramento
Traditional lenders may not always suit every real estate investment. If you need to move quickly to take advantage of a valuable opportunity, consider partnering with one of these top-rated hard money lenders in Sacramento.
Socotra Capital
Socotra Capital, headquartered in Sacramento, was founded to provide efficient and reliable financing solutions to real estate investors. They specialize in hard money loans for various investment needs, offering quick and flexible funding options to help clients achieve their investment goals.
Lending clientele: Residential, commercial, and development investors
Loan criteria: LTV up to 75% of ARV
Socotra Capital boasts a 4.9-star rating on Google with 115 reviews. Clients often highlight the company’s exceptional customer service, speedy loan processing, and transparent communication.
855-889-7626
Vantex Capital Group
Vantex Capital Group, based in California, has specialized in hard money lending since 2003. They offer quick funding solutions, often closing loans in 10 days or less, using their in-house investment fund.
Lending clientele: Residential, commercial, and development investors
Loan criteria: LTV up to 60% of ARV
Vantex Capital Group has a 4.7 star rating on Google. Customers appreciate their responsiveness and speed in processing loans. One reviewer stated, “They did everything they said they were going to do and more.”
800-926-8002
Lantzman Lending
Lantzman Lending specializes in providing private money loans for real estate investors. With a focus on fast and flexible funding, the company aims to facilitate the acquisition, renovation, and development of properties.
Lending clientele: Residential, commercial, and development real estate investors
Loan criteria: LTV up to 65% of ARV
Lantzman Lending has earned a 4.9-star rating on Google. Clients frequently highlight the company’s efficiency, professionalism, and transparent communication.
858-720-0229
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Sacramento?
Choosing whether a hard money loan is right for you in Sacramento means evaluating your personal situation and investment goals. These loans are best suited for real estate investors who require quick and flexible financing for projects like flipping homes or acquiring rental properties. Although these loans are usually quicker and easier to obtain, they come with higher interest rates and shorter repayment terms.
For homeowners aiming to tap into their home equity, the Buy Before You Sell program from HomeLight presents a valuable alternative. It allows you to make a competitive offer on a new home without the burden of high interest rates, offering a small flat fee for a more efficient and less stressful move.
It’s important to consider your long-term financial goals and seek advice from a financial advisor. For those looking to connect with investor-friendly real estate agents in Sacramento who have access to reliable hard money lenders, HomeLight can introduce you to top local professionals.
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