Hard Money Direct Increases Your Financial Power

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Obtaining money for an upcoming project can be hard if you choose the traditional route which utilizes a bank or credit union. It can mean a lot of time spent sitting in an office, signing too many papers, and playing a waiting game that you may lose. An exciting discovery for businesses and individuals looking for a loan is there is another way.

Hard money loans are unique in that they allow individuals and businesses to receive a loan when they would have been rejected by a traditional lender. This type of loan does have cautionary characteristics but still stands strong as a way of increasing your financial power. According to the chief economist of Lending Tree, “If you’re not able to access a traditional loan, then maybe there’s an opportunity here.” For the estimated 68 million people who have bad or low credit scores, according to Vantage Score, this opportunity could not come at a better time.

Let’s take a deeper look into three ways to increase your financial power with a hard money loan.

Streamline the Process

No one likes to spend their free time in an office waiting for answers. Traditional lenders, such as banks and credit unions, are basically playing the middleman of the loan process. In essence, you must talk to a loan officer who then talks to the bank. This “conversation” can take weeks. Underwriters must construct your loan portfolio and write out the terms. This all sounds complicated, right?

In order to gain financial power, take out the middleman. Take control of what you need and how you get it with a hard money loan. Because you will be doing business with the lender themselves, there are no waiting periods to deal with. No, let me call the corporate office. No time spent waiting on underwriters.

Paperwork is another area which can get cumbersome. Hard money lenders will have this down to a science. There are fewer restrictions, therefore, requiring less documentation. In layman’s terms, hard money lenders are more concerned about the collateral than the documents. A fine-toothed comb is not needed in this process.

Flexibility with Hard Money Loans

Everyone needs flexibility in their lives. Why should this be any different in your finances? Hard money loans offer flexibility in which the receiver of the funds can determine how long they need to repay the loan. Because you are dealing with the lender themselves, there is some leniency with the terms. Most lenders allow for repayment times which range from 12 months to five years.

The ability to have a voice in your financial present and future is vital. It gives you the power to negotiate the terms. There are no requirements on terms, leaving you freedom and flexibility.

Financial Leverage

As we have already established, a hard money loan is a way to obtain money quickly for individuals and businesses. This is especially true for real estate entrepreneurs. For example, flipping houses have become big business in the past decade. To flip a house, one must be bought quickly, remodeled, and then sold. Since fabulous deals don’t hang around long, buyers need to snatch them up quickly. With a hard money loan, flippers have a way to get the money they need quickly and on a short- term basis. Long term this could mean more profit in their wallets and better chances of continued success.

Bottom Line…

We all need help from time to time. Sometimes we need help paying the bills or making our dreams come true. When times like these arise, it should not be hard to get help. It should not be difficult to find a way to stand on our own two feet.

Hard money loans are a unique way to get the help we sometimes need. They allow individuals and entrepreneurs to streamline the process, have flexibility, and use leverage. Hard money just makes sense. If you have collateral or assets, then you can take advantage of these loans. They are definitely worth considering. In order to obtain a hard money loan, contact a lender and begin living your dreams.

References

Prittchard, Justin. The Balance. n.d. https://www.thebalance.com/hard-money-basics-315413.

Wiebe, Jamie. Magnify Money. n.d. https://www.magnifymoney.com/blog/mortgage/the-pros-and-cons-of-a-hard-money-loan/.

Residential

Hard Money Residential Lenders On The Rise

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Hard money lenders have definitely found their niche in the real estate industry. This unique form of loan is extremely common in the residential housing arena. But why are we seeing an uptick in the number of lenders taking part in the action?

Unlike traditional mortgage loans provided by banks, hard money lenders use the value of the property as collateral against the loan. These lenders aren’t as concerned with a person’s credit history. Instead, they focus on the value of the home and the borrower’s equity. Although this may seem like a risky venture, many individuals and small companies are getting into hard money lending.

To get a better idea of why these types of lenders are on the rise, it helps to know who stands to benefit from them the most. The answer is real estate investors and homebuyers who can’t qualify for a traditional mortgage loan.

Let’s take a look at the benefits of hard money loans along with the people going after them to get a better understanding of why they’re so popular right now.

Benefits of a Residential Hard Money Loan

We mentioned the fact that hard money lenders don’t place as much importance on a borrower’s credit history when considering them for a loan. This is a huge advantage over a traditional bank loan, in which a person’s credit score has a direct impact on whether or not they get approved.

However, there are a number of other advantages that make hard money loans attractive. Some of the primary benefits to borrowers include:

  • The process of applying for and receiving the loan is quick and easy.
  • Investors can purchase residential property without having much money to begin with.
  • Borrowers have more freedom to negotiate repayment terms.
  • Hard money lenders will typically consider any type of property.
  • Flexible down payments.

Although there are some downsides, such as higher interest rates and lower loan-to-value ratios, they still provide exciting opportunities for people needing quick capital. Real estate investors and homebuyers have made hard money a lucrative business for lenders looking to expand their reach in the real estate market.

Investors and House Flippers

According to stats collected by ATTOM Data Solutions, 49,059 single-family homes were flipped during the first quarter of 2019. Surely all of these investors didn’t have the capital they needed to purchase, renovate, and flip their homes. Instead, they went to a hard money lender to fund their projects.

House flippers like these loans because they’re easier to qualify for than bank or FHA loans. In addition, they can acquire the funds quickly in order to make timely bids on homes they feel would be smart investments. A traditional loan simply takes too long. Furthermore, because house flippers typically renovate and sell their investments quickly, they’re able to adhere to the shorter repayment periods of hard money loans.

Long-term real estate investors also tend to work with hard money lenders to secure the capital they need to complete renovations on a piece of residential property. Often, they need to do this before refinancing in order to get a new mortgage.

Residential Home Buyers Need Fast Cash

Ray Brown was right when he said, “The best time to buy a home is always five years ago.” Residential prices are up from last year. According to the Federal Housing Finance Agency, home prices rose 5.2% from April 2018 to April 2019.

This is bad news for home buyers, especially if they can’t qualify for a loan. Many families are now having a hard time securing mortgage loans from banks with high standards when it comes to credit scores.

Many, however, are turning to hard money lenders to help them buy their first home. Because the lenders are more concerned with the value of the property attached to the loan, a buyer with poor credit history still has a chance.

Furthermore, many homeowners who are facing foreclosure are opting for hard money loans to help them refinance their mortgage. As long as they stick to their repayment terms, they can continue living in their homes.

Regardless of whether you’re looking to get into the lucrative business of house flipping, or simply need a quick loan to buy your first family home, a hard money lender can help. The opportunities they offer simply aren’t possible with transnational home lenders.

Resources:

https://www.attomdata.com/news/market-trends/flipping/q1-2019-home-flipping-report/

https://www.fhfa.gov/AboutUs/Reports/Pages/House-Price-Index-Report-April-2019.aspx

6 Key Awareness Points Before Borrowing Private Money

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A lot of people are interested in taking out hard money loans, particularly if they want to purchase a fix and flip property or a rehab property, which banks won’t usually lend against. Indeed, there has been a significant increase in interest in these types of loans, which are usually taken out for around a year. Using such kind of private money is a great way to build a real estate investment portfolio, but it is important to research whether or not it is an appropriate solution for you. Below are 6 key factors to consider.

1. Make Sure You Choose the Right Lender

You should never simply pick the first lender you come across. Instead, there are questions to ask and considerations to make.

When you want a loan on a short term basis without much documentation then this is the best option. Private money lending is famous for the convenience it avails to persons who require financial funding but may fail to meet the threshold of banking institutions. Bearing in mind the minimal formalities, it brings about risk in dealing with such transactions as you also don’t want a fraudulent money lender to take advantage of you.

Make sure that your lender has experience in the type of deal you are interested in. If you want to fix and flip an industrial property, for instance, find a lender that has successfully invested in that before.

2. Understand Your Financial Role in the Flip

A lot of people like the idea of fixing and flipping because they think they can make a lot of profit. This is also due to television programs that make it appear like such an activity is a lot of fun. However, to do so successfully, you need a lot of expertise and experience and you have to be able to handle the risks involved as well.

3. Try to Help Build Communities by Investing

When you take out a private money loan, you actually invest in a neighborhood and that is a significant responsibility. The money will be used to improve a local area, boost business income, create jobs, and more. When you invest like this, you will see tangible improvements unlike what you would see when buying stocks and bonds. Your lender, therefore, should have a vested interest in the community as well.

4. Don’t Worry If You’re Not Rich

When people think about real estate investors, they often think of property tycoons like Wang Jianlin.

Wang Jianlin, a 1954 born Chinese businessman and philanthropist, serves as the chairman of the Dalian Wanda Group, which is also China’s largest real estate company, as well as the world’s largest movie theater operator. He owns 20% of the Spanish football club Atletico Madrid.

In reality, however, real estate investing is open to anybody, even if you need to get a hard money loan to fund your deals. Of course, you should never put all your eggs in one basket, so you have to find a balance between how much of your own money you can put in, and how much of a private money loan you will need to get.

5. Remember That You Will Have Tangible Assets

Getting a private loan means that you will invest in a material asset. The hard asset is the collateral for the loan, and it is also from this that it gets its name: ‘hard’ money lending. Owning property is a serious commitment that you have to be ready for and you must also understand that tangible assets are often slower to turn into a profit. But when they do, the profits can be substantial.

6. Have Realistic Expectations

Last but not least, it is important to understand that you will not go from being a first time investor to being the President of the United States. Even Donald Trump had to go through several steps before achieving that. When you start at the bottom, the road to the top is long but satisfying.

Finding Hard Money Equity Lenders

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Most people aren’t aware that there are ways to bypass the bank when looking for a loan. If investing in fixer-upper properties is in your horizon or you find yourself in need of cash because life situations arise that are out of your control, finding a hard money equity lender may be beneficial to your needs.

What Does Hard Money Equity Mean?

Hard money loans are asset-based loans that are primarily used in real estate transactions. In simple terms, it is a private loan that doesn’t require mounds of paperwork. A borrower receives funds and the loan is secured by real property that is used as collateral. If the borrower defaults, the collateral becomes the lenders.

“These are private investors who, if the interest rate is high enough and the perceived risk is low enough, they will put the money up,” says Pam Strickland, owner of a mortgage consulting service.

It is called “hard money” because borrowers are charged a higher price in both interest rates and orientation fees.

A hard money loan is funded by private investors as opposed to conventional lenders such as banks or credit unions. The terms of hard money loans are usually short; typically, 6 months to 3 years.

Finding Hard Money Loans Tips:

  • Find a profitable property. A hard money equity lender will not loan on a property that is going to lose money.
  • Partner with someone who is experienced. If you are new to investing, consider partnering with an experienced hard money lender with a portfolio of properties. They can help you get the loan you need and show you how to make the property profitably.
  • Cash reserves are a plus. Hard money lenders prefer to work with experienced investors who have a record of being successful. Being a new investor won’t result in an automatic no, but your chances of getting approved will increase if you have substantial cash reserves and collateral.
  • Have an exit plan. Most hard money borrowers are flipping properties for profit. Show the lender what you are doing to the property in a very detailed plan and emphasize how much money it will make.
  • Keep working on your credit score. While many lenders loan to people with bad credit, you still should try to raise your score. Maintaining a decent credit score will help secure lower interest rates and approval rates for future loans.

Why Use Hard Money Lenders?

Why would someone want to borrow money with a high-interest rate? Hard money loans can be useful for individuals with poor credit, currently unemployed, or need fast cash. According to the Urban Institute, the mortgage denial rate in 2017 was 31% largely due to poor credit. Some of the known advantages to hard money equity are:

  • Hard money loans are fast. Hard money loans can be closed in days or in a few weeks. Getting a private money loan closed quickly is very important to borrows seeking to purchase investment properties. You could easily lose the home to another buyer if you don’t act quick.
  • Hard money is flexible. Lenders of hard money look at each loan deal individually; they do not use formal underwriting like a bank. Most of these lenders are small companies so there may be more room to negotiate the terms of the agreement.
  • Approval can be easier. The collateral you are borrowing on is the most important factor in a hard money loan, especially for borrows with bad credit. If you are purchasing an investment property, lenders will usually only loan out what the property is worth. Many hard money lenders don’t care if you have a foreclosure or bankruptcy on credit; their biggest concern is profitability.

Conclusion

Although the majority of hard money loans fund real estate fix and flip projects, in 2017, Forbes reports that more borrowers are seeking loans for bridge loans (money to cover the gap between two transactions), construction loans, development, land acquisition, and short-term refinancing. Regardless of how the loan is used, this strengthens hard money lending’s noteworthy market share as compared to traditional financing.

Resources

Forbes: How The Rise Of Private Lending Is Reshaping The Mortgage Market  https://www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#260f681452ae

Urban Institute   https://www.urban.org/sites/default/files/publication/98823/real_denial_rates_2.pdf

SF Gate Home Guides   https://homeguides.sfgate.com/hard-money-lenders-2627.html

 

 

How Does A Hard Money Loan Work And Who Is It For?

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A hard money loan is a unique financial construction. It is a short term loan and is offered as interest only. These loans are perfect for those wanting to purchase distressed rehab properties, for which it is impossible to get a traditional mortgage. The interest rate on a hard money loan tends to be a lot higher, with averages of around 12%. However, they can be completed in as little as 15 days and they usually run for no longer than a year, after which the property can be flipped.

Anyone interested in investing in properties very quickly, therefore, may want to consider this type of loan. While they are expensive, they are also quick and reasonably easy to obtain. This makes them interesting for those who would otherwise be declined.

When applying for a loan from a normal financial institution, you will be expected to meet many hard-set requirements. […] As long as you have a high-value asset with at least 20% equity stake in it, there are good chances that you will qualify for the loan.

How Do Private Loans Work?

Private loans are designed to help fund a real estate investment’s purchase and renovation. They are quick to obtain, particularly compared to a traditional mortgage, and they have very flexible acceptance criteria. Fix and flippers, who buy and sell properties within a year, are particularly interested in them.

In addition, they can also be beneficial for a long term investor who holds a property but then switches to a traditional mortgage after renovating a property. As such, the timeline of investment is not so important. Rather, it is about needing money to buy a property that is in disrepair and having the funds for the repairs. Typically, people only pay interest back on their hard money loan while it is running. Generally speaking, these loans also have no prepayment penalties.

While lenders want their money back also – interest is still important to them. When you prepay, you are cutting into the overall interest a lender can earn on financing your loan.

What this means is that, should you complete the work on the property sooner than expected, you can pay off the loan sooner as well. Typically, investors like these types of loans because they pay out so quickly and have minimal requirements. These benefits are so great, in fact, that they are happy to pay more for the loans. Interest rates usually range between 7% and 12%, and lender fees (points) are between 1% and 10%.

Should You Take out a Hard Money Loan?

If you are a short term investor, such as a fix and flipper who doesn’t intend to hold a property for more than 12 months, then you may want to consider a hard money loan. If you are a long term investor, then you should really only consider this type of loan if you know that you will be approved for a more traditional, long term, affordable loan after a reasonably short period of time. Typically, two kinds of investors will consider private lending.

First, there are the fix and flip investors.

Fix and flipping homes may seem like a pretty simple concept. Buy a house that needs some work, fix it up and sell the house. The truth is it takes a lot of time to find the right deal, find the right financing, find the right contractor, decide what to repair, maintain a property, value a property, make sure all the needed repairs are done and then sell the house. Fix and flipping is not something you can spend a couple of hours on a week and be successful.

The reason why fix and flippers look for a hard money loan is because it allows them to finance the purchase price of the property and the money required to pay for the work that needs to be done on the property. Hence, fix and flippers try to find homes in a very poor condition, fix it rapidly, and sell it for, sometimes, huge profit. They find these properties through lender owned REO listings, foreclosure auctions, and short sales.

Usually, investors are able to receive a private loan based on the ARV (after repair value) of the property. They receive the funds, buy the property, and fix it using their hard money line of credit. These investors do have to have some money themselves in order to be accepted for these loans, not in the least because they may have to float rehab costs as it can take a little bit of time before the lender pays out. Once renovations are completed, they sell the property and pay back the lender.

The second type of investor interested in private loans is the buy and hold investor.

Buy and hold is a passive investment strategy for which an investor buys stocks and holds them for a long period regardless of fluctuations in the market. An investor who employs a buy-and-hold strategy actively selects stocks but is not concerned with short-term price movements and technical indicators.

Typically, these investors use a hard money loan to purchase and fix a property. Once that is completed, they take out a traditional mortgage on the property itself and pay off their private loan. They then hold the property, either for them to live in or rent out to tenants and become a landlord. Buy and hold investors looking for a hard money loan generally purchase distressed properties, which means a traditional lender will not fund the deal. This means that they bridge the time period between buying and fixing the property and it becoming a property that a traditional bank would be happy to provide a loan for As such, the loan in this case can be seen as a type of bridging loan.

Qualifying for a Hard Money Loan

Whether you are a fix and flip or a buy and hold investor, one of the biggest benefits of the hard money loan is that it is so easy to qualify. The approval process is also incredibly rapid. However, you do have to be realistic about the serious financial commitment you are making.

Hard Money Lending Advantages

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Being able to get money for a property investment in a short period of time isn’t always easy. Many borrowers tend to go to financial institutions to try to get a loan to finance a property, but that isn’t always the best option. It’s important to consider other financing options, such as hard money loans. With the average home in America costing over $300,000, having multiple finance options is crucial for buyers. Hard money loans sometimes get a bad rap because people don’t take the time to really understand why they can be so beneficial. The following guide walks you through a few of the advantages that come with a hard money loan.

Repayment Terms with Hard Money Loans Are Often Negotiable

When you get a loan from a financial institution, you are bound to the terms they set for the loan. This could mean the interest rate you pay, the date the payments are to be made, how large of a down payment you have to give and more. You do not have a say with most of the terms of the repayment agreement.

Hard money loans work differently. The private lenders work with you to ensure the payments are feasible for you to make. They want to be sure that the payment dates fall on a date that works with your financial situation. This means you can often pick the dates payments are due. If you have to juggle multiple debts at one time, this can be really beneficial overall. According to Consumer Finance, “Getting quotes from multiple lenders puts you in a better bargaining position.” You can compare the rates multiple lenders are offering to negotiate the best terms for your situation.

Qualify for the Loan by Meeting Less Requirements

When applying for a loan with most financial institutions, there are often a lot of hoops to jump through. A hefty down payment is often required. A high credit score and proof of income is needed, as well. With a hard money loan, these factors don’t come into play. The lenders allow you to use the property as collateral for the loan. This makes getting approval the loan less of a hassle.

Avoid Penalties for Repaying the Debt Early

Traditional lenders often charge a fee when you pay off the loan early. This is because they counted on the money, they were going to get from you in interest over an extended period of time. When you pay off the debt early, they acquire far fewer interest payments.

Hard money lenders don’t often require you to pay a fee for paying off the loan early. An origination fee is charged at the beginning of the loan that covers fees for processing the loan. Hard money lenders actually like when you pay off the loan early. They get their money back so that they can invest it in other things. It can also build a rapport with the lenders to make it easier to get approval for a loan in the future.

Gain the Ability to Make Offers on Properties Quickly

The downfall of loans from traditional lenders is that they can take a long time for approval. Every day that you go without approval for the loan is a day that someone else may be buying the property that you want to buy. You can often get approved for a hard money loan in as little as a few days. This allows you to make offers on homes quickly and easily.

Better Your Chances of Getting a Property

When someone is selling a property, they often want the buying process to finish as quickly as possible. Being able to get money quickly betters the chances of a seller accepting your offer over someone else. This can mean that you are able to get premium properties at rock bottom prices.

When choosing a hard money lender, it’s important to talk to them about the property that you plan to buy. You need to know how long you plan to own the property because you will be responsible for the payments until you are able to sell it. Hard money loans are designed to be short term. This means you have a very short term to pay them off. Be sure that any property you choose to purchase can be sold quickly so that you can pay off the loan on time.

References:

https://www.consumerfinance.gov/owning-a-home/explore-rates/

https://www.census.gov/construction/nrs/pdf/uspricemon.pdf

5 Reasons a Hard Money Loan is a Smart Choice for House Flipping

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Last year, almost 208,000 single-family homes and condos were flipped in the United States. In the state of Wyoming, the average gross profit from flipping a house was $33,475.

When a new investor starts the process of flipping a house, it’s easy to get confused and overwhelmed. The right choices can earn you a pretty penny, but less wise choices can leave you upside down. Or even worse shut down the entire project before it’s even begun.

One of the biggest choices an investor must make is which type of financing to use – a conventional bank loan or a hard money loan.  Hard money loans have a reputation for being risky, but there are many overlooked benefits to this less traditional method of funding.

1. Speed

If you have ever applied for a conventional bank loan, you know that it can be a complicated, lengthy process. The applications are often multiple pages and contain dozens upon dozens of questions to trudge through. Once the application has been submitted, it can take several weeks to get a response.

If the loan request is approved, the borrower must wait even longer for the funds to become available.  Many investors simply don’t have this kind of time – the amount of time that passes between filling out the loan application and receiving funding can cost the buyer the investment property for which they needed the money.

Hard money loan applications are simple and straightforward.  There are even hard money loan directory websites where you can submit a five minute, no-frills, no-fuss loan application to multiple Wyoming hard money lenders at the same time.

If an application is submitted in person, it isn’t unheard of to receive approval after only a brief conversation with the lender.  Once approved, funds should be available within a week or two.  In certain situations, a reputable lender can have the funds in less than a week.  This quick turnaround provides the investor with a much better chance of securing the property he seeks.

2. Leverage

Many investors like to have multiple projects in progress at the same time.  This is harder to achieve with a conventional bank loan, as a majority of these lenders will cap the number of loans provided to the same borrower at four.  Hard money lenders see the situation much differently.

They view working with a multi-property investor as a good thing because the borrower has more options available to them; therefore, the lender can cross-collateralized the properties if necessary.

3. Flexibility

The first thing many people think of when applying for a bank loan is the vast number of rules, regulations, and conditions.  Your credit score needs to be good to excellent, which means you should have very few to no missed or late payments in your credit history.

Many conventional lenders require the applicant to have a full-time job.  This can present a problem for part-time employees, independent contractors, or those who are self-employed.  Lenders put all this information together to calculate the borrower’s debt-to-income ratio, which shows how much the borrower owes in debt payments each month in comparison to his or her monthly income.

Sometimes, conventional loans even require the buyer to purchase mortgage insurance, which adds another level of paperwork and headaches.  On the contrary, hard money lenders are far less concerned with credit scores and numbers and much more concerned with possession of assets.  If a hard money lender approves a loan and the borrower fails to repay on time, the lender can seize the funded property and resell in order to reimburse the loan money.

For this reason, hard money loans are best for short term financing for projects such as house flipping.  The investor uses the hard money loan to buy the property, then flips and resells the property as quickly as possible.  The money from reselling should be enough to repay the loan in its entirety and make a profit.

4. Competitive Edge

As previously mentioned, hard money financing moves significantly faster than conventional bank lending.  In the world of real estate investment and house flipping, where multiple investors may have eyes on the same properties, speed is crucial.

Property sellers are, in general, looking for two things:  cash transactions and a quick sale.  Hard money loans provide both.  While investor A is waiting several weeks to have his application approved and loan funded, investor B has cash in hand in less than two weeks and is ready to complete the purchase.

Sellers typically go with whichever investor is prepared first, and investor B is now beginning demolition and construction while investor A is still waiting.

5. Wisdom

Hard money lenders are often industry experts.  A lender specializing in real estate investment is likely to be a wealth of knowledge. They will likely share that knowledge since the project itself is the collateral. The success of the project is what will repay the loan, the lender is also invested in the project and wants it to do well.

They do have the option, if necessary, to repossess the property, but this is not ideal.  The relationship between real estate investor and hard money lender is a partnership.  Because the lender wants the project to go smoothly, he will offer his honest opinion of the project. They will bring to light any concerns or potential issues of which the buyer might not be aware.

Through this process, the investor will not only gain wisdom for future transactions but will develop trust in his lender. Increasing the chances of a successful outcome for both parties.

House flipping has become somewhat of a phenomenon in recent years. It’s easy to see why – it’s resourceful, it’s profitable, and it’s fun.  However, it’s also very labor-extensive and can be stressful.

Don’t add to that stress by dealing with a time consuming frustrating bank loan.  Start the project off right with a quick, easy hard money loan. You will be well on your way to a beautiful finished product.  Contact a reputable hard money lender to get started.

The Low Down On Alternative Lenders And Hard Money Lenders In Particular

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Once upon a time, borrowing against a home was very easy to do. Today things are a lot different. Although it does not necessarily mean that it is impossible to get a mortgage anymore. Rather, it means that you are likely to have to seek out an ‘alternative lender’ instead. Indeed, regardless of whether you want to refinance an existing property, invest in a property, or buy your first home, alternative lenders are certainly worth your consideration.

Millennials are the largest share of home buyers at 36 percent. Sixty-five percent of these buyers were also first-time home buyers.

Who Are the Alternative Lenders?

Basically, they are organizations, groups, and individuals that aren’t banks but are happy to provide you with a loan against your property. Alternative lenders often offer very interesting benefits, including online applications, unique terms and conditions, and help for those with a poor credit score.

There are several factors that contribute to a credit score, including the number of inquiries made for new accounts.

There are also lots of different lenders out there that could be classed as ‘alternative’, although they usually span two different categories. The first is the direct lender, which means that they actually lend their own money. The second type is the broker or middleman, who connects lenders and home buyers together.

The Credit Union

One example of a direct lender is the credit union.

On average, credit unions offer higher saving rates and lower loan rates. This could help group your savings grow faster and loan cost less. Credit unions also tend to charge lower fees, require lower deposit balances and offer better service.

They are a direct lender because it is their money that is provided for home loans. They also have different mortgage process options. Usually, you do have to be a member of a credit union before you can apply, however. Additionally, it is important to be aware that not all credit unions are created equal and that they all have different membership requirements and financial options.

The second type of direct lender is an online lender.

New online-only mortgage lenders and online options for existing lending institutions are available to the public every day. As virtual tools become the new norm, homebuyers looking to finance their big purchase should expect a less intimidating and more efficient borrowing experience.

Because these lenders operate online, they often have opportunities to customize the loans that are available. Additionally, they often only take minutes to approve an application, all of which is done electronically. Their fees are also often much lower than other lenders. However, it can be difficult to speak to an actual person should you have any question.

The Hard Money Lenders as an Alternative Lender

The final option is the hard money lender. These lenders exist for two main types of individuals. First, there are there for those who have applied or tried to apply for all the other alternative lending options and either have been declined or already know they won’t meet the criteria yet. The latter is the better option as it reflects better on the credit score. The second group of individuals who use these loans are investors who know they will soon sell the property, or take out a more traditional mortgage on it. Fix and flippers are good examples of these.

Whichever type of lender you want to go with, it is vital that you exert due diligence and that you do your research. Each alternative option has its own pros and cons. At the end of the day, your financial future is at stake so it is important that you find the one that will give you the greatest benefits.

Hard Money Foreclosure Loan Saves Your Home

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Losing your job can make it very difficult to pay all of your bills on time. There are many people who find themselves drowning in debt after losing their job with seemingly no way out. One out of every 2411 homes in the United States went into foreclosure in May of 2019. If you have worked to pay off as much of your debt as you can and still find your home in foreclosure, a hard money loan may be right for you. Use the guide that follows to find out how you can use a hard money loan to save your home.

Hard Money Loans Can Bridge the Gap

A hard money loan is designed to be a temporary loan. Most hard money loans are repaid in less than two years. When you are approved for the loan, you can use the money to help pay off the debt that you own on your house so that you can stop the foreclosure process. Making your payments each month will raise your credit score. This allows you to refinance your home and pay off the debt you owe to the hard money loan.

The Interest Can Be Intimidating

Some people are intimidated by hard money loans because they have such a high-interest rate. It’s important to realize that if the loan can keep you afloat so that you don’t have to foreclose on your house, the rates are worth paying. You’ll only have to pay them for a short period of time. The lenders need to make money off of the loan and charging an interest rate is a way to make it. You are viewed as a risk to lenders and thus have to pay a higher interest rate than someone who isn’t.

You Don’t Need to Provide a Down Payment

The great thing about a hard money loan is that you don’t need to provide a down payment in order to get it. You can simply use the collateral from your home as the down payment. A third-party appraisal company will appraise the house. The appraisal allows the hard money lender to have an idea of what the value of the property is on the open market. The loan amount they offer to you will be based off of this evaluation.

Your Foreclosure Won’t Affect Your Ability to Get A Hard Money Loan

Traditional lenders will not offer someone in foreclosure a loan. This is because they are such a risk. They assume that the person will not repay their debt on time or possible not repay it at all. The hard money lenders don’t take your credit history into account. The fact that you have a foreclosure on your record doesn’t matter to them. This is because they use your home as collateral for the loan. If you fail to pay off the loan, they can take possession of it and sell it to pay off the debt you owe.

When a home goes into foreclosure, the lender can seize possession of it to sell it to pay off a debt, as well. This means that getting a hard money loan isn’t really a risk for you. It provides you with the extra time to get caught up financially without assuming any additional risks.

A Hard Money Loan Could Actually Save Your Credit

Before your home goes into foreclosure, you are notified by the lender who holds your mortgage. According to USA.gov, you should ” As soon as you realize that you are going to have trouble making your mortgage payments, contact your lender and tell them about your financial difficulties. ” You need to see if you can negotiate different terms of payment with them. If you cannot, talk to a hard money lender right away. You can get the money to pay off the loan for your home before it even goes into foreclosure. This will make it even easier to get your financial life back on track.

Having your house go into foreclosure can be very stressful. Taking the time to avoid it at all costs can make your life easier now and in the future. Talk to a hard money lender as soon as possible if you feel you’re not going to be able to pay your mortgage in the near future to find out what your options are.

References:

https://www.realtytrac.com/statsandtrends/foreclosuretrends/

https://www.usa.gov/foreclosure

 

 

How Taking Out Hard Money Loans Can Make You Rich

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Have you ever walked past an abandoned or closed store or other commercial building and thought about its potential? Many people do, but they never take it any further because they don’t have the money to invest in it. If you really want to bring out that potential, you could consider borrowing the necessary money to make that investment. This is known as an investment loan.

Real estate investment loans, which offer financing for borrowers who intend to buy-and-sell or “flip” a property, are considered riskier than mortgages for owner-occupants.

Unfortunately, investment loans are very hard to qualify for. These loans have been created for those who believe they can make a profit out of something that currently isn’t profitable. In other words, it is a high risk loan and banks are not prepared to take huge risks, except in very exceptional circumstances. That said, investment loans do exist, particularly for commercial building purchases, equipment purchases, factory constructions, and acquisitions.

However, a down payment of at least 25% is often required, which is a significant sum of money, particularly on commercial real estate properties. Most investors simply do not have such amount of money available. Furthermore, they must be able to prove that they can afford the repayments of the loan not after they find tenants for their property, but right now.

How Much Can You Borrow with an Investment Loan

In rare circumstances, lenders will agree to finance up to 100% of the investment. However, in the majority of circumstances, they will only lend up to 70%. Hence, if a property is available for $500,000, it means that you would need to have $150,000 yourself to put towards the property. This is why investment loans are more popular with established real estate investors. Those who already have a solid rental business and simply want to grow their portfolio often find it reasonably easy to find that kind of money. However, this excludes those who want to get started as investors. They need to find lenders with higher loan to value offers, but tend to also charge much higher interest rates.

Meeting the Eligibility Requirements

A second problem with investment loans is meeting the eligibility requirements. Usually, a bank will have a due diligence process in place that you will have to go through. This means having your income and your credit scrutinized as well. In addition, each bank has its own requirements on top of that. It is important to understand that an investment loan is very different from a residential mortgage, even if you want to purchase a residential investment property.

The increased risk means the bank will charge higher interest for the loan, may require a higher downpayment, and will require higher lending standards before issuing the loan. A new housing investor can get around these higher prices by living in the home for a few years before renting it out (though your lender could possibly require you to renegotiate the loan if you move out too soon).

Furthermore, the application process is very different as well, and so with the repayment term. In fact, you can expect to have to pay back an investment loan for a duration of five to 15 years. This means that the duration is much shorter than the standard 30 year mortgage. It also means that the monthly payments are much higher. When you apply for these loans, the banks will make calculations based on your ability to repay the loan within this shorter period of time.

Because these loans are almost impossible to get for first time investors, you may feel as if real estate investments will never make you rich. However, there are alternatives to the investment loan. While they have their own pros and cons, they do offer you the opportunity to consider making an investment and bringing out that potential that you saw in the property in the first place. One such alternative is the hard money loan.

Using Hard Money Loans to Get Rich with Real Estate Investments

A hard money loan is a fantastic way for you to invest in real estate properties if you don’t meet the eligibility criteria for a traditional investment loan. Private lenders often focus on real estate investments. Effectively, they invest not in the property, but rather in you and your ability to make a profit out of that property. Hard money loans may provide you with the opportunity you need.

Hard money (also known as a rehab loan or bridge loan) is the term used for loans funded by private parties who want a safe and high return. Real estate investors use hard money when they are unable to or do not have time to obtain financing from more conventional sources. Typical banks won’t fund these properties because of condition or the fact that a full-time investor isn’t typically W2 employee.

Typically, those who apply for a hard money loan don’t meet certain traditional lending criteria. They may have poor credit, no credit, or otherwise not look perfect on paper. Meanwhile, the properties they are interested in don’t look perfect on paper either. However, a hard money loan is based on assets, and particularly on the value of this asset from the perspective of a business.

One of the greatest advantages of hard money loans is that it is possible to have the money funded in a matter of days. That means you don’t have to worry about missing out on an investment opportunity because the bank took too long to make a decision. Instead, you can put an offer in straightaway.

However, if you want to get rich using hard money loans, then it is vital that you focus on being profitable. You also need to demonstrate this to lenders, who need to have confidence about your ability to repay. This isn’t about how a loan goes through the underwriting process, as it is not a home mortgage. However, it is about your ability to take a property and turn it into something that is worth more and that brings the money in. Do also be aware of the fact that, if you so much as fall behind on a single payment, the lender can and most likely will repossess the property.