While a Hard Money Lender’s requirements may vary, there are standard loan documents associated with every transaction.
Typical loan documents include, but are not limited to:
- Letter of Intent (LOI): The LOI is essentially a formal document that acknowledges all of the parties involved are on the same page. It outlines an agreement between two or more parties before the agreement is finalized. While it is not legally binding, it serves as a preventative measure for miscommunication.
- Purchase & Sale Agreement: The purchase and sale agreement, otherwise referred to as the P&S agreement, is the document received after mutual acceptance on an offer, which states the final sale price and all terms of the purchase. Some of the items covered in the P&S agreement include: final sale price, earnest money details, closing date, title condition, contingencies and more. Inclusions on the P&S agreement will differ from state to state.
- Preliminary Title Report: A title is a legal document listing the history of ownership of a home. After the buyer and seller have reached mutual acceptance, an attorney or title company will review the home’s title to look for any problems that might prevent the home from being legally sold. The results are written up for the buyer in a preliminary title report. In other words, a report of this nature will reveal if anyone other than the seller has legal claim to the property.
- Title Insurance: Title insurance, as its name suggests, is a preventative measure that protects a buyer from anyone that challenges the ownership of a property.
- Proof of Funds: Proof of funds represents a buyer’s intent. It is a way for borrowers to prove that they have access to sufficient funds to complete a transaction. Typically a bank statement, retirement account statement or other legal form is acceptable.
- Proof of Insurance: Proof of insurance is required for either a purchase or refinance to avoid a devastating loss.
- Personal Guarantee: A personal guarantee places some skin in the game for the borrower. In other words, the borrower puts their own assets (real estate, savings, etc.) on the line. This is only in cases where the borrower can’t pay back the loan.
- Mortgage Note: A mortgage note is a promissory note secured by the mortgage loan. The structure of the loan is agreed upon and signed by the borrower.
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