The reason many investors use a private hard money lender is because they fund the project quicker and the criteria is less of a hassle then that of a bank.

When you purchase a loan with a bank, they require you to disclose proof of the following:

•    bank statements showing the down payment
•    paystubs
•    W’2s
•    Credit score of 620 and above

They also take from what used to be 30 to 45 days to look over the entire file of the applicant and give you an approval for closing.

Nowadays they take from 45 to 90 days to give you an approval for closing and that is no exaggeration.
However, a private hard money lender only requires the following:

•    A good property that can be sold for 35% more than the loan amount after repairs

That is it!

They do not run a credit check or ask for any financials. They base their approval on the project, not the person.
It is very wise that you already know the real estate game before getting any money from this type of lender because you need to know how much the house can sell for after repairs and how much repairs need to be done on the home.

This is because it would not make any sense to take money from a lender if it does not cover the repair cost.
What I mean by this is if a home is worth $100,000 after repairs and the private hard money lender is only going to give you $65,000. Then that $65,000 has to cover the price of the home as well as all repairs.

If it doesn’t, then you really have no deal.

Always make sure the loan amount can cover all costs.

Just a little note:  You should also try to include your three month mortgage payments into the borrowed amount as well.

Florida’s courts alone are facing a devastating reality of being overwhelmed with over 290,000 foreclosure filings. This is why there are many people looking to stop foreclosure in Florida.

Although this state is one of the few with lower priced homes, many still fell victim to the subprime mortgages.  When homes were owned free and clear or at a low mortgage, owners decided to refinance, with the influence from mortgage loan officers, and pull out their equity.

This, in turn, raised the price of the home and mortgage payments. These payments then became unaffordable for the owners, which then caused the domino effect.

To stop foreclosure in Florida I would advise you to find a good attorney who specializes in foreclosures. Give them all of your information. Tell them what caused your downfall such as a loss of employment or whatever caused you to fall behind in payments.

Tell them your current financial situation and what, if any, kind of payments you are able to afford now.  The lawyer should be experienced in working with banks as the banks are also overwhelmed with foreclosures and if not handled properly, they will deny your claim.

Do stay away from solicitors that offer to work out your foreclosure for a fee.  Many of these people are just out to take your money. Many of them do not even know how or where to start to stop foreclosures anywhere, let alone in Florida.

You need a hardship letter to stop foreclosure because the bank needs an explanation as to why you fell behind on your payments. They also use this information to determine if your reason is a legitimate one and if you can qualify for a loan modification.

The bank also requires that you give them all of your financial information such as recent banks statements and paystubs.  These documents inform the bank how much you are currently able to afford. They will then determine if it would be in their better interest to continue with the foreclosure and try to sell it, or to allow you to remain in the home.

When writing a hardship letter to stop foreclosure you need to include the following:

1)      What caused you to fall behind

For example did you have death in the family, lose your job or get a divorce.

2)      What your future plan is

Let them know how you intend to catch up and inform them that you can afford to pay if the payments were at least x amount of dollars lower (x being the amount you need taken off).

3)      List all necessary repairs

You may want to add a couple of things that is wrong with the home. This will sought of put the idea in their heads that the home needs repairs and therefore will not be such an easy sell. That way they would rather let you stay in it then to try to sell it themselves.

Make sure when you write your hardship letter to stop foreclosure that you make the letter as personal and sincere as possible.

Years ago it was a little harder to influence the banks to not foreclose when you got behind, but in today’s terrible economy and with these millions of foreclosures on the bank’s books, they now take any kind of explanation and usually decide in your favor.

It is my understanding that many people in foreclosure status would actually like to do anything they can to stop foreclosure sale.  Most of these people have had their homes for many years and allowed themselves to be duped into refinancing homes that were free and clear.

They also refinanced homes that were at an affordable original purchase amount, but because they may have needed extra money for one thing or another, mortgage reps talked people into getting equity out of their homes to pay for whatever extra expenses they may have had.

Because of this, now these people are unable to pay the higher mortgages on their homes mostly because they were talked into a 2 year arm mortgage. This meant that after two years, the interest on the loan will increase according to the market rates and the mortgage would increase drastically.

This all started the domino effect of the foreclosure boom.

Selling the Home

One way to stop foreclosure sale is to actually sell the home.  I was actually in this situation.

I purchased a home for someone who was losing it. I purchased it in April of 2005 with the intent that the previous owner would pay the current mortgage and repair her credit. After the year was up, she was supposed to buy the home back.

She paid the mortgage up until January of 2006 and then stopped making payments.  I then had to take her to court, evict her (done in March 2005) and then pay the mortgage myself because I could not find a tenant.

By June 2006, I was no longer able to make the mortgage payments for this house as well as my own. Meanwhile, the finance company had began the foreclosure proceedings.

I then put the home up for sale in October after getting my foreclosure notice. Luckily, because I’ve been in real estate for years prior to this, I had a list of clients willing to buy the property.

In November 2006 I had the property sold. Because of this, I was able to stop foreclosure sale and pay off the bank what was owed to them in full and walk away with $50,000 profit.

There are three ways to find free government foreclosure listings in and outside your area. Those three ways are through the newspaper, at your local county clerk’s office and on the internet.

•    Newspaper – the local newspaper that covers your county and any nearby county has special days in which they list foreclosures.  In these listings they give you the county, property address, bank name, borrower’s name and amount owed.  It then gives you the time and date in which the sheriff’s sale will have the auction of the home.

The only issue with this is sometimes the owner of the property came up with ways to redeem the property. Maybe they sold it or they may have came up with the amount they owed the bank that started the foreclosure process in the first place. They could have even made some type of payment agreement with the bank.  Whatever the reason, the newspaper does not give you this information.

•    County Clerk’s Office – the county clerk’s office doesn’t technically give you free government foreclosure listings because you have to pay for each copy.  However, after you have gotten your feet wet and learned how to get connections, you can have your “connect” inside the office get you the list for free or damn near free.

I have connections with my local county clerk’s office where I pay them only $50 for a list of 3000 lis pendens. A lis penden is when the bank has just began its foreclosure process (pending lawsuit) and has filed it with the courts. Each copy usually costs from $5.00 to $40.00 depending on your county and how many pages.

•    Internet – the internet is probably the best place to find free government foreclosure listings, especially if you are going out of area.  This is because most sites keep their records updated and with just a click of a button, you can find out foreclosures in any area in America.

Foreclosure.com not only keeps their records updated, but they also email you a free list of foreclosures in your area.
To figure out which method is the best method for you, you should try them all. I would of course start with the newspaper then go to the internet. Familiarize yourself with the process first and then head to the clerk’s office.

Once you get a good understanding of it all, you will find yourself stacked with hundreds or thousands of free government foreclosure listings.

Believe it or not, there is a way for you to stop foreclosure with a single question to your banker.  What is that question you ask?

The question is, “Is there any way we can do a loan modification to adjust the mortgage payment to an amount I can afford?”

The banker will have to then take all of your financial information and figure out if there is any way for them to lower the interest, increase the length of the term and come up with an amount that will be affordable to your income.

Because you are not the only client in this situation, this process alone may take up to six months just for them to give you an initial decision.

Before the foreclosure boom, the banks were notorious for denying these requests because they figured they could make more money selling the property in case of foreclosure.

Nowadays, however, there are more yays than nays. This is because there are way too many homes in this situation and banks are not in the business of real estate selling.

If many more people knew they could stop foreclosure with a single question to their banker, then we would probably have less foreclosures than we are plagued with at this time.

Of course you have to factor in that now after getting a loan modification you will be stuck with a home that is in negative equity.

Homes are now worth like half and sometimes less than that then when they were purchased years ago.  Also, the bank will add all the missed back payments and legal fees on top of the original purchase price.

This makes the home now waaay more than what it is worth.  So you must figure if the home is even worth going through all of that before you decide to stop foreclosure with a single question to your banker.

Many people decide to just abandon the home and deal with the foreclosure on their credit for seven years than to have an overpriced home for forty years.

Being served with a notice that your bank is about to start foreclosure proceedings to take your home because of non-payment can be a scary and embarrassing situation.

Many are unsure what to do when this happens.

Some panic and abandon their home immediately, some will just ignore the letters and phone calls until the sheriff’s officers come a knocking, while the small percentage of the informed will begin the chess match.

You know… In the game of chess, each opponent makes a strategic move carefully watching the other’s strategy and moves.  Whatever move the first opponent makes determines the other opponent’s move.

The same goes for a foreclosure.

The first player is the borrower who makes the first move of non-payment.  The bank then makes a strategic move of beginning the foreclosure proceedings.

Now it is up to the borrower to decide what move they will make next.

Will the borrower run and quit the game or stay and figure out what tactic they can use to gain the upper hand and avoid or at least delay checkmate.

Short Sale

One way to delay this process is to begin to negotiate a short sale.  After giving the bank all of the necessary documents, they will determine if you are incapable of paying the loan on its current terms.

They also take into consideration if the house is no longer worth the purchase price.  They decide this by sending out an appraiser to determine the homes current market value.

Because these steps take some time, especially now with the banks having thousands of foreclosures on their desks, this process can take from six months to two years before a decision is made.

Meanwhile, you are living free of mortgage payments and the foreclosure proceedings is being postponed.

Loan Modification

The second strategy is a loan modification.  This requires the borrower to supply the bank with the exact same income documents, but this time to determine if the borrower can still afford a loan. They will use the documentation to modify the current loan into one that is more affordable.

The amount of the home remains the same.  Well, actually it increases due to the back owed amount and legal fees for starting the foreclosure proceedings.

However, they also increase the length of time you have to pay that loan amount.

For example, the borrower has a term limit of 30 years to pay off a loan of $200,000 in the original loan agreement with the monthly amount being $1200 at a 6 percent interest.

After the banks review, they determine that the borrower needs 40 years to pay off a loan of $250,000 with the monthly amount being $1000 at a 4 percent interest.

This can take the bank between three to six months to make a decision.

Whichever tactic the borrower decides to use, it will still take the bank from months to years to make their decision. Even after that, it would take them even more time to actually continue with the foreclosing proceedings, thereby postponing it to a nice length of time.

There was a time when we heard of people who were homeless, it was usually caused by bad choices in the victims’ early life. Those choices were usually:

• Becoming drug addicted
• Dropping out of School
• Going to jail and therefore becoming unable to get a job

It is also caused by a situation that is out of the victims’ control such as losing a job and therefore not having any income to maintain a home or apartment.

Today, because we are in this recession and  foreclosures are at an all time high, unemployment and other factors are now causing people, who were typically “by the book” and “good hard working people”, to make up a large number in homelessness.

Check out this story of a woman in Cleveland who, too, was once a hardworking homeowner and now has found herself waking up in homeless shelter.

http://www.nytimes.com/2009/10/19/business/economy/19foreclosed.html?_r=2

Unfortunately, this story is being felt around the entire USA.

When trying to decide what type of foreclosure is a good one, you need to evaluate the cost of the property to it’s estimated value.

For example.

If a foreclosure is worth $200,000 after repairs, then the asking price can be no more than $130,000.  This is because hard money lenders will only allow you to borrow 65% of the ARV (after repair value).

$200,000 x .65 = $130,000

However, if you need construction costs to be included, then you need to deduct that amount from the $130,000 and that amount will be your offer.

So, if construction repairs is $20,000, then:

$130,000 – 20,000 = $110,000

You should only offer $110,000.

If you have repair money and do not need to borrow towards it, then $130,000 is a good enough offer.

Many people are uncertain about whether or not they should jump into the field of real estate.  It usually is because of the fear of not knowing how or where to start.

However, there are a number of people who honestly do not believe there is money to be made at all.  This is so crazy because there is an astronomical number of people loosing their homes today more than ever.

Even with the “Obama loan modification” people are continuing to loose their homes.

If you thought things were beginning to look up then you are wrong.  Check out the real numbers.