A Guide To Hard Money Loans

For a lot of people, real estate is their most valuable asset. And when facing a real estate downturn or a bubble burst, having a private financing partner can mean the difference between success and failure. Hard money lenders have been around for decades and are most successful during economic downturns. Typically, they invest in commercial and residential real estate that has fallen in value.

A hard money loan can be an option when you can’t or don’t want to go through a traditional lender. This type of loan is intended for home flippers and real estate investors, as no property or credit checks are required. Instead, the borrower will provide a personal financial statement and documents supporting their financial situation.

However, that personal financial statement is important, as it serves as your repayment plan. In other words, if you can’t provide evidence of your ability to afford a monthly payment, you will have a tough time getting a hard money loan.

What is a Hard Money Loan?

If you’ve been searching for financing to buy a house, but banks or other traditional lenders turned you down, hard money lenders may be an option worth considering. While hard money loans differ from conventional mortgages, they’re also not ideal for everyone.

Hard money loans are quick, easy, and—most importantly—cheap. Instead of paying closing costs, broker fees, private mortgage insurances, and a host of charges that traditional lenders impose on lenders, such as Charlotte hard money lenders, waive all those hassles and expenses, well, nothing. So, how do you get a hard money loan? First, you have to find a hard money lender. And while many hard money lenders are out there, not all are created equal.

Hard money loans are very similar to conventional loans: the borrower must have a good credit score, sufficient income, and sufficient assets. However, hard money lenders are much more lenient in their requirements and often charge higher interest rates. The main reason hard money loans appeal to borrowers is that they are funded quickly, often within 24 hours, whereas conventional loans usually take weeks.

Are Hard Money Loans a Good Idea?

Hard money loans were created to finance individuals and businesses that could not obtain funding from a traditional bank. They are used for various purposes, including commercial and residential real estate purchases, renovations, refinances, bridge loans, acquisition, development and construction loans, etc.

Charlotte hard money lender’s portfolio is usually limited to a specific property type, such as multi-family homes, apartment buildings, mixed-use properties, and office buildings. They lend based on the lender’s experience and knowledge of the area, the property, and the potential for success.

Generally, hard money loans are great for quick, urgent, and last-minute real estate deals that require a lump sum of money. Because hard money loans are more expensive than traditional bank loans, hard money lenders can be more flexible about your credit history and the type of property you are funding. However, hard money loans also carry higher interest rates. Because of this, hard money loans are best for short-term projects that won’t take long to pay off.

Benefits of Hard Money Loans

If you are a business owner, the chances are that at some point, you will encounter the need to have business funding. A hard money loan might be the answer. Here are the benefits of hard money loans.

You Don’t Need a Good Credit Score

When you deal with hard money lenders, you’ll first notice that they are not interested in your credit score. Most hard money lenders do not even run a credit check on you.

This is because they are lending you money based on your property. They are not concerned with your ability to pay back the money they lend you on the strength of your income. They are more concerned with the value of your property. If you have a good credit score, you will have a good relationship with a bank. However, the bank may not be willing to lend you as much money.

However, you still need to be able to pay your mortgage on time and have enough equity in the property you are buying to secure the loan. You should be able to put up to 50% down.

You Can Close On the Loan Quickly

Conventional rehab mortgages can be complex, and it’s easy to get lost in the details if you’re unaware of the process. The process can be overwhelming, cumbersome, and costly, often costing a borrower money through interest rates and fees.

With hard money loans, you can quickly close the loan within a week, but you must have the property fully appraised and inspected. It takes just a few days to fund the loan if the loan is approved.

They are Flexible

If your property is in good condition, you may be able to negotiate a lower interest rate or monthly payments. You can even arrange a longer repayment schedule. Whether or not you can negotiate these terms will depend on the type of hard money loan you have and the lender you are dealing with. Most lenders are willing to negotiate terms, although they may not be willing to extend repayment dates. Some hard money lenders will not make any changes to the terms of the loan.

Collateral

Hard money lenders offer a way for real estate investors to sidestep banks and conventional sources of debt and financing. In this scenario, the borrower is not required to put up any personal assets or collateral, and the lender is not concerned with the borrower’s credit history or credit score. In this scenario, the borrower is not required to put up any personal assets or collateral, and the lender is not concerned with the borrower’s credit history or credit score.

Conclusion

Hard money loans have been a popular method for financing real estate projects since the late 1990s. Unlike traditional business loans, the underwriting of hard money is based on the property’s value, which must be verified. Lenders may charge high-interest rates and require borrowers to pay points.