In what geographic areas do you lend?
We are a Texas-based lender currently operating in the Austin, Houston, and San Antonio areas.
How do you determine my interest rate?
When determining your interest rate, we take several factors into account including property location, credit score, borrower experience and loan to value. We’re happy to provide all borrowers with their interest rate sheet so they know exactly why they are paying their particular rate. Currently, rates range from 8.5% to 14% for standard hard money loans, and 12% to 14% for construction loans.
Will you lend on my homestead?
No. We do not lend on homesteads or a borrower’s current residence. All of our loans are considered commercial loans meaning that they are for business purposes. We lend on rehab properties, rentals, etc., but they cannot be inhabited by the borrower.
I’m better off with a traditional mortgage, right?
In a word, yes. Hard money loans are short-term, high-interest loans. Typically they only make sense for investors that are getting an excellent value and plan to resell (or refinance) the property in 3 to 12 months. If you can qualify for a traditional mortgage, it will nearly always be less expensive than a hard money loan.
Who benefits from using hard money loans?
Real estate investors who don’t qualify or don’t want to deal with the requirements of traditional bank loans. Read about investors who have made use of our loans on our case studies page.
Banks can lend at much lower rates but their criteria are much more stringent. Banks evaluate you, the borrower, as their primary qualification. Hard money lenders evaluate the investment property as our primary qualification, which allows us to move more quickly and requires much less documentation. Beyond that, we use the after-repaired value to evaluate your loan, something few banks will consider.
Why should I use a hard money loan?
The most compelling reason to use a hard money loan is its speed. Our process is very simple and we don’t require tax returns, personal financial statements or really any of the hoops that banks will make you jump through.
Hard money is expensive, but it is available quickly with few questions or restrictions. If you are getting an excellent deal that needs to close quickly, a hard money loan could be the perfect solution.
Investors who have a number of outstanding loans are also served well by hard money loans. If you’ve reached your lender’s 4-loan or 10-loan limit, we can help you continue to leverage your real estate investments.
Who uses hard money loans?
- New real estate investors who can’t demonstrate enough income or cash reserves for a bank to qualify them
- Investors with poor credit, undocumented income or a short work history
- Experienced investors with more than 4 mortgages in their name
- Investors buying properties that need significant repairs
- Buyers who need renovation funding, not just purchase funds
- Investors who don’t have the cash required to close with a conventional loan
- Real estate investors who are highly leveraged elsewhere
- Buyers of properties that won’t appraise as-is for an acceptable value
- Buyers dealing with distressed sales that must close in days, not weeks
- Buyers of rental properties that are under-rented, in need of repair or otherwise problematic
- Property owners with high equity who need quick access to cash for any reason
Will you lend to my LLC?
Yes, nearly all of our loans are made to real estate investment companies.
Do I have to have cash at closing?
Not necessarily. Unlike some hard money lenders, we don’t require that points or fees be paid at closing. The only strict criteria is that you meet our loan to value requirement. Your loan offer is based on 75% of the retail value of the property. See a detailed example on our Hard Money 101 page.
If you’re getting a smoking deal, cash at closing is generally not required.
Are there any up-front costs?
You will have to pay for a survey and an inspection, if you choose to have one. Certain loans may also require a licensed appraisal. There is a small fee for document preparation from our attorney. We charge a small upfront processing fee, depending on the amount of your loan, but we get nothing unless we fund your deal.
What do I pay at closing?
At closing you will pay origination points, a $350 document preparation/legal fee from our attorney, your hazard insurance premium and the other costs detailed in your earnest money contract. These costs may include title insurance, survey, escrow fee, printing and delivery. Talk to your title agent for those details.
If your loan amount remains below 75% of the after-repaired value, some or all of the closing costs can be rolled into your loan. If you’d like to see detailed examples, go to our borrower case study page.
Can I use a hard money loan to buy and repair a property?
Yes, our loans are designed to enable investors to buy, rehab and flip properties. You will need some cash reserves to run a renovation project, but if you get a good enough deal on the purchase side it is possible to do a rehab with no money out of pocket.
What if I borrow money for construction or rehab? Do I get that money at closing?
If your loan includes funding for repairs, you will be required to escrow the repair funds and draws will be released as those repairs are made. Most borrowers need some cash to make this work since we won’t typically release the funds needed to get a contractor started until his work is complete.
You should expect to have some cash on hand if you’re running a renovation. For example, your foundation contractor might require 50% up-front for materials, but we won’t be able to release your loan funds for the foundation until the foundation work is complete.
What’s your time frame for approval?
We understand that motivated sellers often need to move quickly, so we strive to give you a “yes” or “no” on your deal within 24 hours. We do have the capacity to fund loans the same day or the next business day if necessary, although a rush fee may apply.
How long does it take to close with a hard money loan?
5-7 business days from initial contact to funding is typical if your title commitment, survey and seller are ready to go. One of the biggest advantages to a hard money loan is speed. Traditional lenders cannot compete when it comes to getting your deal done quickly. We have closed deals in as little as 24 hours before; it’s not our preference but it is possible.
Do you allow deferred payments?
No, interest payments will be required monthly with very few exceptions. If your loan to value is well below 75%, then you may be able to roll your first few payments into the loan.
What criteria do you use to approve borrowers?
Hard money loans are primarily asset-based, so our main focus is the value of the property. We research and determine the market value of the property and establish what we’re willing to lend, typically about 75% or less of the after-repaired value. We do take other factors into consideration including investor experience, location and rental income.
What credit score are you looking for? Do you verify employment? Reserves?
Our minimum FICO score is 550. However, if you have a good credit score, we can discount your interest rate. We do not verify employment, reserves or DTI.
Can I use your hard money loan program if I already own 4 (or 10, or 20) properties?
Yes, our hard money loan programs are ideal for investors who own too many investment properties for a traditional lender to finance them. We do not have a limit on the number of mortgage loans you can have out. If you have the equity and 75% loan to value or less can meet your needs, we can help.
Will you do a cash-out refinance on a property I already own?
Yes, if you have at least 25% equity in the property and you need quick access to cash our hard money loans could be a perfect solution.
What is the maximum amount you will loan?
There’s not technically a limit, but our comfort level (per unit) is between $100k and $800k since the majority of sales in the Austin market are between $150k and $1M. We will always consider larger loans, so bring us your deals!
Am I required to use your title company and attorney?
Our attorney prepares the documents and you will pay their fee for preparing them at closing. We don’t require borrowers to use our title company; it’s usually chosen by the seller. We do require title insurance in our name for (at least) the loan amount.
What is your early payment fee or penalty?
We charge 4 months minimum interest, but there are no penalties.
Do your points vary with the term of the loan or is it always 3 points on all loans? Would you consider a longer loan term?
Nearly all of our hard money loans are on a 1-year term and 3 points origination. Discounts and longer loan terms may be available on occasion for loans with exceptional loan to value and for repeat borrowers.
Can I borrow hard money for a rental property?
Yes, but because our loans have a 1-year term you will need to refinance before your 12 months are up. Also be aware that our retail value will be heavily weighted on recent comparable sales, not necessarily income.
If I want to keep the property for a rental how long will it take to refinance?
Refinancing terms vary greatly depending on the lender you refinance with and your personal financial situation, but 4 to 6 months is certainly possible.
Do you lend on multi-family properties?
Yes, although we typically only offer multi-family hard money loans to experienced investors. On multi-family we may use the rental income to help support value instead of strictly recent comparable sales.
Do you lend on commercial properties?
Commercial loans are not given preference, however if you have experience and you find a deal at 60% loan to value or better we will consider making a commercial hard money loan for you.
Will you lend on land?
Yes, but only to experienced investors with a clear exit plan. Loan to value on land is restricted to 50%.
What if I need more than one year?
We will consider extensions, but you should be prepared to sell or refinance by the time your loan term ends. Extensions are not guaranteed.
How do I get a pre-approval letter to submit with my offers?
Call or contact us with your business name and contact information. Most sellers and real estate agents will view an offer accompanied by our pre-approval letter as a “same as cash” offer. Commitment letters can also be provided once we have approved your loan.
What’s different about Little City Investments?
We are a small group of experienced Austin real estate investors. We lend private money, are not a fund and service our own hard money loans. We are very fast and can be very creative. Plus, if you borrow from us, we’ll buy you a Coke.