What is a hard money lender?

What Is a Hard Money Lender?

Who do you imagine when people talk about a private hard money lender? Many people don’t have a good understanding of who hard money lenders are. Unfortunately, this kind of private investor is seen by many as a shady person who will break your legs if you don’t pay your debts in time. This image could not be further from the truth.

The Private Hard Money Lender

A hard money lender is a private investor or a group of investors who can offer a hard money loan. The main difference between them and banks is that they are not institutions. Their activities are less regulated, which enables them to create their own rules.

More and more people are entering the hard money lender market. Bloomberg recently reported that private credit is on the rise lately, and it is helping to fuel the current private equity boom. Private credit is now reported to be as big as $776 billion. While hard money lenders are not the bulk of those credit offerings, they are certainly an important part of them.

It’s important to understand who these investors are and what they can do for you. In fact, it’s important to understand what a hard money loan is. They are short-term loans that are generally used to buy properties. They are secured by the property that is being bought, and are considered safe investments. That is, if you are careful and only invest in property after you’ve done plenty of research.

People generally take hard money loans to “flip” houses. That means they buy a property with a low market value, renovate it, and sell it for profit. The idea is that you can buy the property quickly, fix it up, and turn a quick profit. The faster you do it, the more you’ll profit.
This activity is becoming pretty common. According to ATTOM Data Solutions, 2019 marked a 9-year high in home flipping.

Before you look for a hard money lender, you should know that they are not fit for all investments. They are most ideal if you can’t go to a bank or don’t have time for the process.

How Does The Hard Money Lender Benefit?

The hard money lender’s benefit comes from comparably high-interest rates. People who can’t, or don’t want to, use traditional lenders generally seek out hard money loans. This happens for several reasons, and they work as a second option, as well.

Loan fees can be around 5 percent, and the annual interest could easily be higher than 15 percent. Not many investments allow for these profit margins so quickly. Overall, this can be beneficial for both parties.

Another reason why people decide to become hard money lenders is that they can determine their conditions and guarantees. This gives them many advantages during the negotiation.

Lenders generally lend up to between 65% and 75% of the value of the property that they hold as collateral. But, some decide to take on more risk for the benefit of a higher interest rate. The higher the interest rate, the more profit the lender will achieve. The time frame to pay off these loans is often short. Most of them have to be paid in 12 to 24 months.

Keep in mind that fees and interest may vary a lot, though. This practice is not strictly regulated, so lenders can set prices and conditions as they wish. Do your research and tread with caution when looking for a hard money lender.

The criteria for approving loans may also vary from lender to lender. Most of the time, they don’t evaluate someone’s credit for approval. Their attention is most set on the asset that they are lending money on.

Finding The Right Hard Money Lender

If you need a loan, it is important to find the right hard money lender. You need someone that you can trust and preferably who will be near you.

You should look for a professional investor who has experience with hard money loans. Ask for referrals from previous clients or associates. Learn as much as you can about the lender’s past business practices. This will help you avoid fraudulent lenders and scammers.

You should also get to know the hard money lender before you sign any final paperwork. It’s also a great idea to ask an experienced attorney to look at the details of the contract before you sign it.

Remember that hard money loans are not without risk. If you are well-prepared, however, you’ll minimize unhappy surprises.




How To Get A Hard Money Loan

If you are a small business looking to invest in your company, a land developer or even an architect, you may already be aware of hard money loans. With the inflexibility of banks or other traditional lending institutions, you may have decided that a hard money loan is the best way for you to finance a project without having to sell any property or assets.

How do you go about getting a hard money loan? Much easier than you might think. Here are some tips to go about it the right way.

Find a Good Hard Money Lender

Firstly, it’s important to do your research. The American Association of Private Lenders estimates that there are around 40% more hard money loan providers in the country than there were three years ago! So, although the market has widened, it is not subject to much regulation, so don’t just go to the first one that you come across.

Genuine hard money loan providers will be interested in your project, and they hope to build long term relationships. Some, although thankfully very few, are simply glorified loan sharks. Learn the difference before you get burned. According to Jay Garner, chief executive of Quicken Loans, a lender who has provided hard money loans nationally, companies such as theirs has a mission “to lend to people properly and responsibly, following the guidelines established by the particular agency that we’re selling mortgages to.”

Here are some ways to discern the good from the bad:

  • Reviews – ask around locally, especially with real estate companies, if there’s anyone they have heard of who is well regarded in the area.
  • Has this lender financed loans like the one you are seeking at any time in the past? It’s a red flag if they haven’t.
  • Can you meet the hard money lender, or at least someone that works for them? If not, it’s best to avoid them, as they may just want to get your money.

Applying for a Hard Money Loan

Now you have found a reliable lender you need to present your plan. Even though you don’t need the same amount of documentation as for a normal bank, you still have to come prepared.

  1. Let the hard money loan provider know the value of the property in question. This is one of the most important pieces of information for them, not your credit score. The loan will be given against this. You may need to present budgets for construction or renovation and repairs.
  2. Tell them about the area that the property is in. Have information on how much other homes/businesses went for in the area. They are looking for a good investment. Have your prices of other developments and properties in that area? You can check out zillow.com and realtor.com to do some research.
  3. Show them your financial plan for the property. You can likely get between 60 – 70% of the after-repair value of the property, but you’ll need to come up with the rest. If you have some cash in hand, then it will make the approval even quicker.

If you have a history of making risky, but ultimately good investments, then let them know.

Ensure that you get some legal advice before you sign a contract with a hard money lender. You need to make sure that you are protected within the terms of the agreement. Also, ask your lawyer about any impact that the hard money loan may have on your personal liability.

You should stay in contact with the hard money lender. Give them the information they need to show how much you want the loan. Especially in cases where they only lend to a small number of people, if you miss out, they may have decided to lend to another party.

Things to Note

A hard money loan is not the same as a mortgage or a loan from a traditional lender. The terms are different – usually the approval time is a lot less, and you require less documentation. However, you also will have to pay the loan back much quicker than a traditional loan and at a higher rate of interest. If you think that this works in your favor and that you still stand to benefit from the transaction then it could be a fantastic decision.




Hard Money Mortgage Loan Advantages

“This is a real-estate-driven economy from top to bottom,” says Christopher Thornberg, leading economist and Director of the UC Riverside School of Business Center for Economic Forecasting and Development. So that would make mortgages the cornerstone of the current economy. Today, traditional lenders must abide by strict regulations. Finding mortgages to buy, refinance, or renovate real estate is not as easy as it was just over a decade ago. This is where the hard money becomes a mortgage loan advantage.

If you want to get ahead, or even maintain your position, then you need financing. Previously, many consumers viewed hard money lenders as untrustworthy loan sharks, but times have changed. Banks haven’t been lenient about their terms since before the crash. With statistics showing the average home sale closing in around 73 days, time is of the essence when it comes to buying.

What is the Mortgage Loan Advantage with Hard Money?

Veteran real estate investors already know the mortgage loan advantage they are gaining with a hard money loan. However, if it’s your first time, or you’re buying a home to get into the flipping market estimated at $58 billion, then it’s best to arm yourself with some facts.

Gaining Approval and Funding Quickly

One of the biggest mortgage loan advantages that taking a hard money loan will give you is that it’s a quick process. In some cases, with one individual lender, you could be looking at just a single day. But that’s usually if you are very experienced.

Hard money mortgage providers look at the value of the asset. That’s the property that is backing the loan. They don’t care about your credit rating. If you have provided evidence that this is a good investment, they’ll move quickly. Having access to funds this quickly is an important asset for real estate investors in escrow. Some find that their original lender pulls out or simply doesn’t deliver the funds. A hard money lender can step in to provide the cash and make the deal go through.

When you consider that a normal mortgage provider can take around two or three months to extend credit, waiting less than a week will seem like a dream come true. It also means you can get moving faster.

More Financing Available: A Mortgage Loan Advantage

If you apply for a mortgage with a traditional lender, you’ll need to put down up to 20% of the asking price of the property. This will mean that you get better terms on the loan, but that may not be what you want, especially if you’re renovating. Who wants to pay for a renovation five years after it’s taken place?

A hard money mortgage will have shorter terms, but it is possible to borrow against the anticipated value of the property after the renovation. This changes things! You may be able to borrow 100 percent of the purchase price.

A Hard Money Mortgage is Good for Your First Investment

If you are just starting out as an investor, a hard money loan can allow you to purchase property with a minimal amount of your own capital. As long as you present your research on the investment, the hard money mortgage loan provider can also verify that it’s a good investment. With this support, you are at an advantage, as you can quickly start on that project you’ve had your eye on.

Help You Build a Relationship

If you establish a relationship with a hard money lender, this will give you a mortgage loan advantage when you choose to invest again. All you need to do is honor the terms of the contract and pay back the loan on time. Good relationships between hard money lenders and clients can mean that the lender extends more financing, reduces origination fees, and achieves shorter approval times.

Contact a Hard Money Mortgage Provider

Whatever your investment goals are, having a mortgage loan advantage will always stand in your favor. Hard money loans are pretty effective when it comes to the real estate market, which can move fast. Check real estate groups and social media real estate forums to discover hard money mortgage providers in your area.




Need A Hard Money Home Loan? Expect To Pay More In Interest

You can get approved for a loan by using your home or property as collateral. Getting a loan this way is called a hard money loan, and it’s easy to apply for and get approved. But you do need to be prepared for the higher interest rates that come with hard money home loans. Hard money loans continue to be popular. Many people use hard money loans without ever approaching a traditional mortgage lender. People use hard money loans for their mortgage for a variety of reasons.

Hard Money Loans are Often Used for Construction Projects, Flipping a House or Buying Property

Sometimes people get hard money loans to help finance a small business or project. In general, hard money loans are excellent for properties that you fix and flip, land loans, and construction projects. Julie Aragon, a Los Angeles based mortgage expert,  relays why some people gravitate to hard money loans.

“Individuals who buy properties, renovate them, and resell them for a profit are known as property flippers, will often get hard money financing because they can get the cash they need fast. This expediency is beneficial when they’re bidding on a property.”

Hard Money Loans Come from Individuals or Investors

The investors who put up the hard money loan usually require you to have higher interest rates. There are some things that can help you find reputable hard money lenders. This includes the most reasonable interest rate possible. Keep in mind if you put your home or another property up as collateral and default, the hard money lender can take that property. It’s their protection from losing the loan money plus interest they gave you.

The Hard Money Loan Lender Interest Rate Range

Financing Strategies for Real Estate Investments is a mortgage hard money lender. They lend you between 60-70 percent of what your property value is. It’s a win-win for most investors because if someone they lend to defaults on their payments, their property can be taken by the moneylender. It’s important to know that reputable hard money home loan lenders want to build a long term relationship with you. They don’t want to have to go after your home or property for a loan to be paid off. There are ways you can research and find out the difference in reputable hard money loan lenders who have reasonable interest rates and the ones you want to stay away from.

Research and Find Reputable Hard Money Home Loan Lenders

Hard money home loan lenders can charge you points and fees based on the amount of money you borrow. Since the loan points are based on a percentage of your loan, you want to be careful to figure out what one or two extra points will cost you when you’re paying it back. For instance, if you borrow $500,000 and your loan comes with two or three points, each point adds another $5,000 to your original loan. You also need to check your hard money home loan lender’s reputation by seeking reviews from others who have used them. Find out if they have a positive history in dealing with those that borrow money from them. If possible, try and meet with your hard money home loan lender because hard money investors are worth having a positive relationship with.

Your Next Step

Your next step is figuring out what type of home loan you want to pursue, and if it’s a hard money home loan, research and find the best one to fit your needs. While your approval time is a lot less, you also have less time to pay it back. Sometimes you have to pay a hard money loan lender back in twelve months. Although sometimes you can stretch it out to two-five years under special circumstances.

If everything above represents what you want to do and then you can find no better resource than a hard money home loan lender. There are so many ways you can benefit from a relationship with the lender. Don’t wait, move forward and find a hard money loan lender that helps you get the future you deserve.







How Successful Builders Aren’t Stopped By Lending Limitations

The Great Recession signified death for many businesses, and particularly the construction industry. Very few survived it, in fact. Those that did survive have a solid footing on the market today, but they are few and far between. The vast majority of construction companies continue to struggle. One of the reasons for this is that, although there is more credit available and the underwriting process is easier construction financing, or acquisition, development, and construction (AD&C) loans, are still hard to get.

The Basel III standards impose increased capital requirements on banks for acquisition, development and construction (ADC) loans for commercial real estate projects. These commercial construction loans are now designated as “high-volatility commercial real estate” (HVCRE) loans, and banks are required to assign these a “risk weight” of 150 percent, compared to other business loans, for purposes of calculating the capital they must hold against these riskier loans.

What this means in simple terms, is that new developers don’t even have to bother asking for a loan through a community bank. Indeed, this was a key area of concern for 2018, something picked up on by the Federal Deposit Insurance Corporation (FDIC) and the NAHB, which has observed a dramatic slow down in construction lending. This doesn’t mean that lending is no longer happening, but rather that it continues to be very difficult, despite being in a growth cycle.

For builders, these are confusing times. On the one hand, demand for new properties is up, but creating supply is impossible through traditional means. This also highlights the importance of finding an alternative.

Why Community Banks Won’t Lend

Traditionally, community banks were fantastic sources for AD&C loans, because of the fact that they focused on the local market. Unfortunately, ever since the Great Recession, the risk has simply been too big for them. In fact, statistics show that small banks were hit the hardest.

The recession was especially unkind to small community banks. About 85 percent of banks that failed 2008-2011 were considered small, with assets below $1 billion. Smaller banks tend to have a larger portfolio of small business loans, therefore increased risk. But smaller banks also tend to get involved in local community development and philanthropy.

Bankers haven’t forgotten the Great Recession, and neither have developers. People still prefer to be cautious, despite the fact that, for nine years, a growth cycle has been experienced. The economy may be doing well but people feel they are on tenterhooks and expect another bubble to burst. Construction, in particular, is always very risky, with a lot of failures and defaults regularly noted because resources can no longer be found. Banks do not yet have the security themselves that enable them to mitigate this risk.

Increased Scrutiny

There is a strong sense of risk aversion and one way in which that is mitigated is through increased scrutiny. Different forms of lending have been observed, including an increase in loans for single families. At present, community banks aim to have no more than 35% exposure to each of the different asset classes and this has proven to be a good strategy.

Low interest rates coupled with an improving U.S. economy have stimulated CRE markets nationwide, resulting in strong price increases and high valuations. At the same time, the commercial mortgage-backed securities (CMBS) market has not been a huge source of competition for banks. These factors, combined with historically benign asset quality performance, have promoted relatively strong growth for CRE lending, most prominently among regional and community banks.

It is also believed that, with the appointment of Joseph Otting to the Office of the Comptroller of the Currency, which happened in November 2017, regulatory oversight is going to get better. Indeed, banking partners agree that there will be a loosening of regulations, which could spell benefits at local levels. While this is a fantastic development, it doesn’t resolve the fact that, in the here and now, banks aren’t lending and commercial real estate investors and developers still need funds.

The Solution

In response to the tight regulations of banks, and particularly of community banks, investors and developers are turning to private lenders instead. Hard money loans are reasonably easy to get, particularly for projects that have a strong chance of success. They are high risk, but this risk is mitigated by high-interest rates and short loan terms. As such, hard money lenders can ensure that they get their money back if nothing else.

Money is business. Banks may provide a financial service but, at the end of the day, their goal is to make more money. They do so cautiously, in part because they build lengthy lending relationships with their clients. Private lenders, meanwhile, also simply want to make more money. But they do so boldly, working with borrowers for short periods of time. They are two opposite sides of the spectrum, in other words.

Construction loans, in particular, are also highly complex. This is another thing that banks are resistant to. They would prefer something that is easy to understand, easy to underwrite, and easy to work on. Hard money lenders, by contrast, are visionaries. They don’t mind working over complex figures and other difficulties, because they can see what the potential in that project is, and what the end result is likely to be. They are realistic, in as such that they won’t lend on a project that they believe has no chance of success, but they also don’t mind taking risks, sometimes very significant ones.

Today, therefore, there are two classes of successful construction companies. The first class is the one that was around before the Great Recession and that continued to operate through it, never giving up and never having to close its doors. Those are the ones who have the biggest chance of going to a community bank and getting approved for a loan. The vast majority of construction companies, however, are new ones or have re-opened after the Great Recession was over. For them, the banks aren’t open yet, but hard money lenders are.

What is a Hard Money Investor

What is a Hard Money Investor?

So, you and your spouse are ready to buy a new home. Around 32% of homeowners with less than stellar credit got turned down for a housing loan in 2017 alone, though. So, you’ve come up with another idea. You want to rent out another property that you own and put that money toward the house of your dreams. The problem is that the house needs a lot of work. Work that you can’t afford, either. You may want to enlist the help of a hard money investor.

By going through one of these investors, you’ll be able to get the loan that you need in a few days so you can start your renovation project. There are many pros and cons to these types of loans.

To help you weigh these pros and cons and decide if going through an investor would be right for you, here is a quick guide on everything that you need to know about them.

So What is a Hard Money Loan?

Let’s start from the beginning by telling you a little more about the loan. A hard money loan is a short term loan given to you to pay for real estate investments. The money that you’re given can vary depending on what you’re putting up for collateral, your credit history, and the value of the house you’re doing renovations on.

This money is given to you by a private investor rather than a bank. The interest is usually a little higher on hard money loans, and you’ve got a shorter time to pay it off. Even so, it can be worth it for you to use them as a means to fund your real estate projects.

Hard Money Loan Vs. Other Loans

Why not go through a soft loan rather than a hard one? If you wanted to go the soft money route you would have to jump a lot more hoops. First, you have to have a good credit history. This will be reported to your creditor as an inquiry. “This Inquiry will have a small but negative impact on your credit score.”

On top of having a good credit score, you also have to give up proof of income. If all this checks out then the bank might approve you for the loan.

Getting a hard money loan is a little bit easier than that. When you try to get one of these loans, you’ll be giving up property as collateral to the hard money investor. It’s because you’re giving up something physical as collateral that the investors are less picky about your financial status and credit history.

Why Go Through a Hard Money Investor?

The interest rate on hard money loans is higher than soft ones, and you don’t have as long to pay it off. So, why would you seek an investor? The answer is that the process is faster, there is more flexibility with it, and the approval rates are higher.


Soft money lenders go through your application with a fine-tooth comb. They take everything into account from your credit history to your bank statements. As you can imagine, this makes the process go much slower.

Again, in the case of hard money loans, you’re giving up something as collateral. The hard money investor doesn’t want to have to take the property that you give up, but they can if they have to. This means that they aren’t as thorough with looking over your application. You’ll know much faster if you got the loan or not.


Large banks and corporations have strict repayment schedules that you have to abide by. Hard money investors are a little more flexible than that. If you build a good relationship with the investor, they may be willing to talk things out. You’ll be able to get a repayment schedule that works for you.


The most important thing to a hard money investor is collateral. If they have to take your property back they can sell it fast, and they know it. They may look through your finances and credit history, but these things will mainly affect how much money you’ll get. It’s more likely that you’ll be approved for the loan than not.


Maldonado, Camilo. “32% Of Applicants With Less Than Perfect Credit Were Denied Mortgages In 2017.” Forbes, Forbes Magazine, 27 July 2018, https://www.forbes.com/sites/camilomaldonado/2018/07/27/32-percent-of-applicants-without-perfect-credit-denied-in-2017/#26ea218a4b18

“What Exactly Happens When a Mortgage Lender Checks My Credit?” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/ask-cfpb/what-exactly-happens-when-a-mortgage-lender-checks-my-credit-en-2005/.



What Are Hard Money Brokers?

Hard money brokers

Are you in need of a hard money loan? People with low credit scores or aren’t able to give proof of income to traditional banks and credit unions aren’t able to get a loan. However, hard money loans might solve your financial problems. Learn more about how you can use hard money brokers to get the best loan possible from a lender.

What Are Hard Money Loans

Have you been trying to get a traditional loan? When you have gone through all other financial options, then a hard money loan could help you. It’s easier and faster to get one than traditional ones, which can be beneficial to those who need quick money. Traditional loans take too long and might not be an option for those with low credit.

People might become desperate to help finance their new house flipping business or their investment in real estate. Having the money to purchase a house on the market you want is crucial since it could easily be bought from another buyer.

How Hard Money Lenders Approve You

Getting approval from a hard money broker can be easier than traditional lenders. But you still have to put in the work and effort. You can get approval if the property you want them to invest in is worth it for them. You will have to put up some property as collateral to make the loan a possibility. Without it, you won’t be able to get a hard money loan.

Writing a thorough and organized proposal on how you will repay them will only help you get approval. A sloppy one might not get you far with some investors. Make sure you have an excellent plan for them not to say yes to. Having an exceptional property for them to make a profit off will be a further incentive to approve you for a loan.

However, you shouldn’t be too hasty when you get a hard money loan. According to the Financing Strategies For Real Estate Investments, if you aren’t able to repay the lender, they can “repossess the property because they have a first lien position and will handle it themselves.” This means they have the right to sell the property and take the sell for profit.

What Are Hard Money Brokers

Trying to figure out your first steps after deciding to get this loan might intimidate some. That’s why hard money brokers can come in handy for those who want to get the best deal. Hard money brokers are the middlemen who connect you with hard money lenders that’s right for you and your financial situation.

Hiring A Money Broker

Why do you need a money broker? As reported by the Financing Strategies For Real Estate Investments, hard money lenders will lend about 60-70% loan-to-value of the property you want to put up as collateral. You can’t get a loan that’s 100% worth the value of your home. These lenders need to make money out of their investment in real estate.

So, hiring a money broker can help you connect to lenders who are more likely to invest in the price range that satisfies you. You could search and find excellent money lenders online, but not all of them are willing to contact the borrower directly. Therefore, money brokers can help since they can be a middleman between you and the investors willing to invest in small or large real estates. Without them, you might not have access to investors that maintain a low profile or don’t want to be in contact with the borrower.

However, ask your broker how much they charge you for their services before hiring them. Paying them is another bill you have to think about when hard money loans become your last resort in getting the property you want.

If you are planning on getting a hard money loan, consider hiring a money broker. They can give you excellent connections to investors who match your loan goal or ones who will provide you with the best deal. It can save you more time by having the help of a professional who knows how to deal with busy investors. Research today to see which money brokers are right for you and your family. You can be one step closer to making your house flipping business a reality!

Source: http://ideaexchange.uakron.edu/cgi/viewcontent.cgi?article=1445&context=honors_research_projects



Could Banks Start Offering Safer Payday Loans?

Hard money lending is highly controversial. While it certainly has its place in the world of real estate investing, one form of it has received a bad reputation, which is that of payday loans. These loans attract everyday individuals stuck in a financial conundrum, but then trap them in an increasingly deep hole of debt. Now, it seems that a new system will allow banks to offer short term loans, and to do so in a way that is much safer for the average American. But is that even possible?

High-Risk Hard Money Lending

What attracts people to payday loans is that they are for low amounts and very short term. While they have interest rates of 300% or above, the fact that they are short term means that people effectively only pay around $60 in interest. People know they are dangerous, yet continue to apply for them.

People use payday loans to avoid borrowing from family and friends, and to avoid cutting back further on expenses. But they often end up doing those things anyway to pay back the loan.

The problem with payday loans is that most people simply do not have the ability to repay them, which means they roll them over instead, paying only the fees. A recent report by the Pew Charitable Trusts showed that, on a $375 loan, the average paid in fees is $520. Suggestions have been made to resolve this, including:

  • Allowing payday loans to be turned into installment loans instead
  • Limiting how much the borrowers have to repay to 5% of their monthly earnings

According to the Pew Charitable Trusts, doing so could save consumers around $10 billion per year.

A Better Solution

To help people avoid debt traps, the Consumer Financial Protection Bureau has put new underwriting requirements in place.

The rule generally requires that, before making such a loan, a lender must reasonably determine that the consumer has the ability to repay the loan. The Bureau has exempted certain short-term loans from the ability-to-repay determination prescribed in the rule if they are made with certain consumer protections.

What is perhaps more interesting is that, on the very same day, the Office of Comptroller of the Currency rescinded their rulings that made it all but impossible for banks to offer small-dollar loans.

The final rule regarding short-term, small-dollar loans submitted to the Federal Register by the Consumer Financial Protection Bureau necessitates revisiting the OCC guidance.

What this effectively means is that people can now once again turn to their banks in order to apply for small loans, and they are likely to get them. However, this doesn’t resolve the issue at hand, which is that people simply do not have enough savings to meet financial emergencies. Indeed, research has shown that 44% of people in this country would not be able to raise $400 in case of an emergency.

Not just that, but there will always be a place for hard money lenders, because of the role they play in real estate purchases. Because these lenders are private lenders, it is at their discretion to determine who they loan to, and under what circumstances. And considering that, despite the October regulations, the demand for residential hard money lenders continues to rise, and it seems that there will always be a place for them. Perhaps, it is time for a reclassification that no longer sees a payday lender as a hard money lender. In so doing, the industry could be more fairly regulated, while at the same time protecting the average American from the predatory practices of the payday lender.

Hard Money Lenders – Who are They and What Do They Offer?

Housing hunting is fun, but also stressful. Many people see buying a home as a significant milestone of adulthood. But what happens if your credit isn’t right? While you can attempt to get a traditional bank loan with a co-signer, there’s also another option. Hard money lenders provide the funds for purchasing a property to people with damaged credit. A hard money loan offers similar pros and cons to a traditional loan, but it might be easier to get.

Who Are Hard Money Lenders?

No, they aren’t creepy characters in a trench coat making backdoor deals. Hard money lenders are privately funded lenders. They are not affiliated with banks, credit unions, or mortgage lenders. People with a history of poor credit, bankruptcies, or foreclosures, might consider a hard money loan. The hard money loan amount is based on the property value. If the borrower is unable to repay the loan and defaults, the hard money lender takes possession of the house and resells it.

What Terms Are Included in a Hard Money Loan?

Years ago, a hard money loan lasted typically for a short term of one to five years, but this is no longer the case. Now hard money loans come with longer terms, which makes them more attractive to home buyers. However, a lender generally wants a return on their investment. Therefore, a borrower needs to have some of the money necessary to purchase the property as a lender won’t lend out more than 70 percent of the property’s current value. This practice ensures the lender can sell the property if you default and collect their money plus extra.

The lender’s interest rates could be higher than traditional, Federal Housing Administration (FHA), or Veteran Affairs (VA) housing loans. Hard money lenders might charge 10-15 percent interest rates.  Points ranging from two to five are added to the loan amount to generate an origination fee. Two points are two percent of a loan amount of $150,000 equaling a $3,000 origination fee.

According to Forbes, 32 percent of mortgage loan applicants with a credit score of less than 700 were denied. Sure 68 percent of applicants were approved, but what about the others? “Just because you have a low credit score doesn’t mean you can’t purchase a home. There are a lot of options out there for consumers…,” says Randy Hopper, senior vice president of mortgage lending for Navy Federal Credit Union. Property buyers looking to invest in a flip or a home should consider applying for a hard money loan because it could be the answer to their dilemma.

The Benefits of Using a Hard Money Loan

The home buying process might be lengthy, depending on how long it takes to find a property. But the way you purchase the house could drag if you attempt to apply for a traditional home loan. Factors like the amount you need, credit score, and negative items on your credit history might reduce the chances of approval. Therefore considering a hard money loan might be a valuable option because of the benefits associated with them.

Faster Application Process

Since a hard money lender isn’t focusing on your credit score, the application process goes by quicker. A hard money loan is ideal for someone who doesn’t want to wait for the bank to run a credit check, look into employment history, or to review bank statements. If a borrower has cash available, approval can usually occur within a week as opposed to 30 – 45 days for a regular mortgage loan.


Hard money loans come with a flexibility that other investments don’t offer. Because hard money loans don’t use regular underwriting and examine the numbers for each deal, the length of the loan and the interest rates can get negotiated.

Short Term Deals

Hard money loans are best for short term borrowers. The higher interest rates don’t make them suitable for a person who wants to live in the property long term. A person who intends to buy and flip a home could make out well with a hard money loan, especially if the purchase, repairs, and selling happen fast.

If you’re looking for an easier and faster way to finance your property buying needs, then a hard money loan might be right for you. To learn more about hard money loans, please contact a hard money lender to discuss your interest.









Hard Money Vs. Bank Money In Florida

When it comes to real estate, new investors and buyers should look at hard money vs. bank money in Florida. Many people are used to the traditional route of applying to the bank for a mortgage.

However, rather than just looking at bank money in Florida, there are options for borrowing from hard money lenders. So, what are the differences between hard money and bank money in Florida? It’s worth taking a closer look to determine which one might suit your needs best.

The Difference Between Hard Money and Bank Money in Florida

When you approach a traditional lender such as a bank, they will examine your application based on three main things:

  1. Credit: Your credit score and your history of making payments.
  2. Ability to pay off this current loan – your earnings and assets.
  3. They have stringent regulations and in order to get your hands on bank money, you need to meet those.

When you approach a hard money lender, they don’t have as much interest in your credit rating or history. They are vaguely interested in your capacity to pay off the loan. They will zero in on one main thing – an asset that will be the security. The number one difference between a hard money lender and getting bank money in Florida, is that the bank won’t let you use the property you’re buying as collateral, but the hard money lender is only interested in that.

What Else?

Length of Time to Close the Loan:

It’s no secret that banks take their time processing loans. This is due to the regulatory bodies that they have to abide by. Every box must be ticked, every document scrutinized and this takes time. This means that it usually takes a bank about 3 – 6 months to assess an application, and that can feel like a very long time, particularly in real estate. As Ray Brown said “The best time to buy a home is always five years ago,” and in a market that changes rapidly, waiting any length of time is just affecting your investment.

If you go for a hard money loan, you can get it in anywhere from just a few days to a few weeks, at most. If you’re buying to flip real estate, which happens regularly in Florida, time is of the essence. Tampa-St. Petersburg, Florida had the 4th highest flipping rate in the country in 2018 at 8.2%.

Interest Rates:

If you’re looking for low-interest rates, then bank money is the winner. One of the reasons that banks can offer lower interest rates is because their risk is much lower. The length of time of the loan will also be far longer, more like 10 – 30 years in comparison to a hard money loan. Current bank interest rates stand around 3.45% for a 15-year fixed mortgage. With a hard money loan, you will have a much shorter term, with much higher interest – probably around 30% of the value upwards.

Property Types:

Most traditional bank loans for real estate focus on single-family homes and some commercial properties. On the other hand, hard money loans can be used for bridge loans, construction loans, and mixed-use property loans. If you are investing or looking at something that isn’t conventional, then hard money wins here against bank money.


The big difference between getting a hard money loan versus a bank money loan is down to regulations. Traditional banks and lenders are licensed, whereas not all hard money lenders are. This is because they are private individuals or companies with their own money.

Recently, Governor Rick Scott vetoed House Bill 747, which would have made it a huge challenge for hard money lenders to operate in the state and in fact would have damaged the housing market. According to Adam Millsap at the Charles Koch Institute, “Florida’s population is increasing rapidly, but the housing supply is not keeping up.”

Since the Great Recession, banks have moved towards standardized products and not thinking outside the box when it comes to lending, and this can push many people beyond the qualification levels needed for loans.

Which is Best – Hard Money or Bank Money?

If you want the safety and security of a long-term loan with low interest and can meet a bank’s requirements, then bank money is the way to go. If you need more flexibility or need money fast for a good investment, then hard money should be right up your street. Whatever is best for one person may not be for another, so it’s up to you to make the final decision.