Getting a trust deed loan requires proper planning and research. A trust deed loan is a form of private lending between a borrower and a nontraditional lender such as a private investor or "hard money" lender. Unlike a traditional mortgage issued by a bank or thrift a trust deed loan is a form of private loan where the lender solicits, underwrites, and processes the money being lent to the borrower. The loan is first secured with a deed of trust on the real estate and supported with the borrower’s personal guarantee.
Compute how much money you will need to borrow. To do this calculation, subtract your down payment from the sales price. For example, if you want to invest in a property offered for sale at $120,000 and your down payment is $20,000 you will need to borrow $100,000 ($120,000 - $20,000 = $100,000). If the amount you want to borrow exceeds the private lender's loan to value requirement you will not be eligible for a loan from that private money lender.
Research the various private lenders offering trust deed loans that service the area where you intend to make the real estate investment. Start your search by reviewing companies that are members of the Real Estate Investment Association. You can view members directory online at the association's website (see Resources).
Contact the private money lender to determine whether or not you qualify for a private trust deed loan. For instance, Continuum Capital Funding LLC makes loans only for multifamily, retail, office and industrial properties, and issues loans in amounts of less than 60 percent of property value. For example, an investor looking to receive a loan from Continuum Capital for a multifamily property with a valuation of $1 million could not apply for a loan exceeding $600,000.
Complete the loan application if you meet the private money lender's underwriting requirements. For instance, Continuum Capital requires that you provide it with the type of property for the loan, the requested loan amount, the most recent appraisal value of the property, and the purpose of the loan such as refinancing or outright purchase.
Provide any additional personal and financial information requested by the lender. Once your application is under review, the lender may require that you supply it with other supporting documentation as part of its due diligence.