Hard Money Lenders San Diego: Quick Financing Options
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Kelsey Morrison Former EditorClose
Kelsey Morrison Former EditorKelsey Morrison worked as an editor for HomeLight's Resource Centers with seven years of editorial experience in the real estate and lifestyle spaces. She previously worked as a commerce editor for World of Good Brands (eHow.com and Cuteness.com), and as an associate editor for Livabl.com. Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec, and lives in a small mountain town in Southern California.
Are you exploring options to fund your next real estate project in San Diego? Whether you’re aiming to flip a craftsman cottage in South Park or acquire an investment property in Pacific Beach, hard money lenders in San Diego can provide the fast and flexible financing you need. Hard money loans are a popular alternative to conventional financing, especially for those with tight project timelines, limited initial capital, or less-than-perfect credit.
For those not involved in real estate investment but needing to bridge the gap between buying and selling a home, this guide also offers alternatives to help you leverage your home’s equity. In this article, we’ll cover the fundamentals of hard money lending in San Diego, guiding you through the process and helping you decide if this financial tool is the right fit for your real estate investment or home-buying goals.
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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 individual or company that provides short-term loans secured by real estate. Unlike traditional lenders, who heavily weigh the borrower’s creditworthiness and income, hard money lenders in San Diego focus primarily on the property’s value being used as collateral.
These lenders typically work with clients like house flippers and those purchasing rental properties who need quick access to funds and flexible terms. Hard money lenders use after-repair value (ARV) — the estimated value of a property after all renovations and repairs are completed — to determine the loan amount they are willing to offer. They usually lend a percentage of the ARV to ensure the investment’s profitability and security.
Hard money loans come with higher interest rates, typically ranging from 8% to 15% or more, and shorter repayment periods, usually between 6 and 24 months. Additional costs can include origination fees, closing costs, and points. If a borrower fails to repay a hard money loan, the lender can seize the property to recover their investment.
How does a hard money loan work?
If you’re a real estate investor in San Diego looking for a financing option that offers speed and flexibility, connecting with hard money lenders could be the right move. Here’s a quick overview of how hard money loans work:
- Short-term loan: These loans usually have a repayment period of 6–24 months, unlike the 15- or 30-year terms of conventional mortgages. Some lenders may extend the term up to 36 months if needed.
- Faster funding option: When you need to close a deal quickly, hard money loans can be approved within days, compared to the 30 to 50 days typical for a mortgage loan.
- Less focus on creditworthiness: Approval relies less on your credit score or income history and more on the property’s value.
- More focus on property value: These loans require collateral, such as a home, and are based on the loan-to-value ratio of the property.
- Not traditional lenders: Individual investors or private lending companies usually provide hard money loans, not traditional banks.
- Loan denial option: These loans are often used by those with poor credit who have been denied a mortgage but possess significant home equity.
- Higher interest rates: Due to higher risk, these loans have higher interest rates than traditional mortgages.
- Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30%, depending on the property’s value and loan specifics.
- More flexibility: With less government regulation, hard money lenders in San Diego can set flexible credit scores and debt-to-income (DTI) criteria, and loans can help avoid foreclosure.
- Potential for interest-only payments: Unlike traditional mortgages, hard money loans may allow for interest-only or deferred payments initially.
What are hard money loans used for?
Hard money loans are a great option for specific financing needs in San Diego’s real estate market. They’re popular among investors who need quick cash or struggle to get traditional bank loans. Let’s look at what hard money loans are typically used for:
Flipping a house: For San Diego investors flipping homes, hard money loans provide quick access to funds for purchasing and renovating properties. These loans enable flippers to secure properties in competitive markets, complete necessary updates, and sell them for profit within a short period.
Buying an investment rental property: Investors looking to acquire rental properties can benefit from hard money loans, especially for homes needing immediate repairs. These loans allow landlords to purchase, renovate, and start generating rental income more quickly than traditional bank loans.
Purchasing commercial real estate: Hard money loans are frequently used in commercial real estate due to their flexible terms and rapid closing times. This flexibility is crucial in fast-moving markets, allowing investors to seize opportunities that require quick decisions.
Borrowers who can’t qualify for traditional loans: Those with significant home equity but poor credit often turn to hard money lenders for financing. These loans prioritize the asset’s value over the borrower’s credit score, making them accessible to a wider range of borrowers.
Homeowners facing foreclosure: Homeowners at risk of foreclosure can use hard money loans to refinance their debt or buy time to sell their property. This option can help prevent the loss of their home and avoid the negative impact of foreclosure on their credit history.
How much do hard money loans cost?
Hard money loans typically come with higher costs due to the increased risk and expedited process. Here are some typical costs associated with hard money loans:
- Interest rates: These can range from 8% to 15% or higher, depending on the lender’s risk assessment.
- Origination fees: Lenders may charge 1% to 5% of the total loan amount as an origination fee.
- Closing costs: Additional fees at closing can include legal fees, appraisal fees, and other administrative costs.
- Points: Lenders might charge points (a percentage of the loan amount) upfront, adding to the initial cost of obtaining a loan.
There are many online calculators available to help estimate these costs.
Alternatives to working with hard money lenders
If you’re a homeowner, as opposed to an investor, seeking a way to leverage your current home’s equity, here are some options to consider:
Take out a second mortgage: Leveraging the equity in your home through a home equity loan or a home equity line of credit (HELOC) can provide necessary funds at more favorable interest rates than hard money loans.
Cash-out refinance: You can borrow cash to fund new investments by refinancing your existing mortgage. This method often offers lower interest rates and longer repayment terms.
Borrow from family or friends: Personal loans from family or friends can be a viable alternative. They often feature flexible repayment plans and minimal or no interest, making them a more cost-effective solution.
Use a government-backed loan program: Federal programs such as those offered by the FHA, VA, or USDA offer lower down payments and reduced interest rates, which can benefit qualifying buyers.
Peer-to-peer loans: Online platforms like Funding Circle connect borrowers with individual investors. These loans can serve a similar function to hard money loans but might offer different terms and conditions.
Specialized loan programs: Explore specialized financing options designed for specific purposes, such as fixer-upper loans or investment property refinancing, to find a loan that meets your particular needs.
Request a seller financing option: Some sellers may be willing to finance the sale themselves, offering lower closing costs and more lenient qualification criteria. This can be a convenient alternative to traditional financing.
How to buy before you sell
Sometimes, the perfect home comes on the market when you least expect it. Maybe it’s a charming ranch-style home in Point Loma or a modern condo in Little Italy. If you’re a San Diego homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that simplifies the process.
The Buy Before You Sell (BBYS) program lets you leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved within 24 hours, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the inconvenience of moving twice.
Here’s how HomeLight Buy Before You Sell works:
The program charges a flat fee of 2.4% of your current home’s sold price, but the potential savings can outweigh this cost. You might save on moving expenses, temporary housing, and even secure a better deal on your new home. Additionally, HomeLight’s BBYS fees are typically lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.
3 top hard money lenders in San Diego
Traditional lenders can be reliable for real estate financing, but they often lack speed and flexibility. For time-sensitive opportunities in San Diego’s competitive real estate market, consider one of these top-rated hard money lenders.
Source Capital Funding, Inc.
Source Capital Funding, Inc. is a direct hard money lender with a local office in San Diego. They lend throughout California, Arizona, Minnesota, Texas, and Colorado. The company specializes in providing hard money loans for various real estate investments, including residential, commercial, and fix-and-flip. They can usually provide written approvals within 24 hours and fund loans in a matter of days.
Lending clientele: Residential, commercial, and development real estate investors
Loan criteria: LTV up to 65%
Source Capital Funding, Inc. has garnered a 4.9-star rating on Google based on over 300 reviews and an A+ rating from the Better Business Bureau (BBB). Clients commend the company for its professional service, quick funding process, and clear communication. “The team at Source Capital Funding was fantastic,” wrote one reviewer. “They helped me close an important client on a unique mixed-use property. Their professionalism, speed, and solid loan terms are why I will be coming back to close more business with them.”
888-334-6636
Lantzman Lending
Lantzman Lending, based in San Diego, specializes in providing hard money loans for real estate investors in California, Nevada, Washington, and Texas. They offer same-day approvals and typically close loans in five to seven days. The direct lender finances fix-and-flip loans, construction loans, refinance loans, and commercial loans. Combined, their team has over 50 years of direct private money lending experience.
Lending clientele: Residential, commercial, and development real estate investors
Loan criteria: 65%–70% ARV (flips); otherwise, up to 65% of current fair market value or finished value
Lantzman Lending has earned a 4.9-star rating on Google. Clients frequently highlight the company’s efficiency, professionalism, and transparency. “Very easy to work with and quick transaction,” one reviewer wrote “Their service was incredibly smooth, and they maintained constant communication throughout the process.”
858-720-0229
North Coast Financial, Inc.
Based in Oceanside, North Coast Financial is a direct hard money lender with over 40 years of experience. To date, the company and its affiliates have funded over $800 million in real estate loans in California. Unlike other companies, they provide hard money loans for real estate investors and property owners. Most loans can be funded within five days, and they offer same-day loan approvals.
Lending clientele: Commercial and residential real estate investors, as well as homeowners
Loan criteria: Depends on the loan program; for example, LTVs up to 70%–75% are available for residential real estate investment loans with financing terms up to 3 years
North Coast Financial, Inc. has been BBB-accredited since 2015 and holds an A+ rating. They also have a perfect 5-star rating on Google. Positive reviews highlight the employees’ quick responses, professionalism, and reliability. “Don and the North Coast Financial team performed flawlessly throughout the entire process,” reads a recent review. “At every stage, they never missed a beat, they always moved impressively quickly, and they always delivered exactly what they said they’d deliver, with never any surprises.”
760-722-2991
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Should I partner with a hard money lender in San Diego?
Deciding whether a hard money loan is right for you in San Diego depends on your specific real estate goals and circumstances. Hard money loans are best suited for real estate investors who need quick access to funds for projects like flipping houses or purchasing investment properties. These loans offer flexibility and fast approval times, making them ideal for time-sensitive opportunities in San Diego’s competitive market.
However, if you are a homeowner looking to leverage your home’s equity, HomeLight’s Buy Before You Sell program might be a better fit. This program allows you to make a non-contingent offer on a new home while paying a small flat fee instead of dealing with high interest rates. It also simplifies the process, enabling you to sell your current home after moving into your new one.
As with any major financial decision, it’s important to consider your long-term strategy and consult with a financial advisor. For those looking to connect with experienced real estate agents in San Diego who have access to trusted hard money lenders, HomeLight can introduce you to top professionals in your area.
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