Asset-Based Lending for
Real Estate in California

North Coast Financial is a direct asset-based private hard money lender with more than 45 years of experience providing fast and flexible financing options to real estate investors and homeowners in California. With over $1 billion in hard money loans funded, North Coast Financial is one of the most experienced hard money lenders in California.

Asset-Based Mortgage and Asset-Backed Mortgage Lenders

An asset-based mortgage, also called an asset-backed mortgage, is a real estate loan approved on the value and equity of the property rather than the borrower’s income or credit history. The terms asset-based mortgage, asset-backed mortgage and equity-based loan all describe the same type of financing. As direct asset-based mortgage lenders, we underwrite the asset, so borrowers who cannot document income through traditional pay stubs or tax returns, including self-employed borrowers, real estate investors and retirees, can still qualify depending on the specific scenario. Approval is based on the property and the borrower’s down payment or equity, typically 30 percent.

Asset-Based Mortgage with No Income Documentation

Because an asset-based mortgage is primarily underwritten on the property rather than the borrower’s income, it does not require the same type of income documentation a conventional mortgage demands.  There are no pay stubs, W-2s or tax returns required for approval. This makes an asset-backed mortgage a practical option for self-employed borrowers, business owners, real estate investors and retirees whose income is difficult to document but who hold significant equity in California real estate.

Due to current federal regulations, no income documentation is usually only allowed for consumer bridge loans, asset depletion loans and investment/business purpose loans. The borrower will need to verify they will have funds available to make the monthly payments on the loan and ultimately have a reasonable exit strategy.

Asset-based lending for real estate involves a loan amount which is secured by real estate assets (residential, commercial, industrial). The main criteria for loan approval from asset-based mortgage lenders is the value of the real estate (the asset) as well as the amount of down payment (or equity in the case of a refinance) the borrower is able to put towards the purchase. Conventional lenders such as banks and credit unions are most concerned with credit and income. Asset-based lending is also commonly referred to as equity-based lending.

The focus on the value of the real estate and the borrower’s equity allows asset-based lending companies to fund loans at a much faster rate than conventional lenders. It also allows for the asset-based lenders to overlook issues such as less than perfect credit scores, insufficient income history and other blemishes on a borrower’s record. These are all issues that would likely cause a bank to deny a borrower’s loan request.

If the borrower doesn’t make the agreed upon payments and ends up defaulting on the loan, the asset-based lender is able to force the sale of the property to recover their investment. The most common example of asset-based lending companies are hard money lenders (private money lenders).

Asset-Based Lending for Real Estate Investors (Equity-Based Lending)

Many real estate investors utilize asset-based hard money lenders in order to obtain fast approvals and funding with relatively few requirements and documentation. Asset-based lending allows for funding a loan within a few days if necessary. Trying to obtain the same loan from a bank could take 2-3 months for the approval and funding process to be completed.

The vast majority of hard money lenders provide equity-based lending for residential real estate. Some specialized lenders will also offer loans on other property types such as commercial, industrial and land. Asset-based hard money lenders are capable of funding a wide variety of loans such as fix and flip loans, bridge loans, purchase loans, investment property loans, cash out and refinance loans, estate, probate and trust loans, distressed property loans and various other loans secured by real estate.

Asset-based loans often require a down payment of at least 25-30% for the purchase of the real estate. For a refinance, the borrower must maintain at least 25-30% of their equity in the property. When the borrower provides a down payment (or maintains equity) of this amount it provides some protection for the lender. Asset-based lenders require that the borrower has some “skin in the game”. The higher the borrower’s down payment/equity the higher the likelihood of loan approval. Asset-based hard money lenders are also more likely to provide better lending terms for a lower loan to value ratio.

Asset-Based Lending for Primary Residences

All asset-based mortgage lenders will provide loans on investment property for business purpose. Very few asset-based lenders will provide owner occupied (primary residence) consumer purpose loans. This is because consumer purpose loans are subject to additional government regulations, require more licensing and involve a more extensive underwriting process.

Asset-based lenders who lend on primary residences can consider providing short-term loans to strong borrower’s with a reasonable exit strategy. The borrower must be in a position that will allow them to refinance into a long-term conventional loan in the next 1-3 years.

Asset-Based Lending Rates

Asset-based lending rates are higher than long-term rates available from conventional lenders. Expect asset-based lending rates to be in the range of 9-12% interest depending on the loan to value ratio, lender, property type and location, strength of the borrower and various other factors of the loan scenario. While the interest rates are higher, asset-based loans are intended for short-term use only. The speed of approval and funding as well as the convenience of more flexible lending criteria make up for the interest rate.

Asset-Based Mortgage FAQ

What is an asset-based mortgage?

An asset-based mortgage is a real estate loan approved on the value and equity of the property rather than the borrower’s income or credit. North Coast Financial provides asset-based mortgages secured by California real estate.

What is the difference between an asset-based and asset-backed mortgage?

There is no difference. Asset-based mortgage and asset-backed mortgage are synonyms for the same equity-based real estate loan funded by a private lender.

Can I get an asset-based mortgage with no income verification?

Yes. Because approval is based on the property and equity, an asset-based mortgage does not require pay stubs, W-2s or tax returns. It is a common option for self-employed and real estate investor borrowers.

Who qualifies for an asset-based mortgage in California?

Borrowers with sufficient equity, typically a 30 percent down payment or equity position, in California residential, commercial, industrial or land property. Call (760) 722-2991 for a free quote.