Private Lenders and Hard Money Loans

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Are you searching for a way to gather quick funds for a project or investment? You may need to turn to private lenders and take out a hard money loan to make that happen. Many people turn to hard money loans to help achieve their short – term goals or projects. Bloomberg’s Michael Sasso noted, “However, a for-profit trade group called the American Association of  Private Lenders estimates the number of hard money lenders and related  “private money” lenders at 8,300, or up almost 40% since 2016.”

What Are Hard Money Loans?

Hard money loans are secured based on real property assets. These types of loans are generally seen as last resort loans. These loans are primarily used for real estate transactions. Hard money loans are normally provided by private lenders or companies. This is different from typical loans that are provided by banks. These types of loans are taken out for a short amount of time and have higher costs associated with them. The terms of hard money loans are often negotiated between private lenders and borrowers.

How Do They Work?

The negotiated terms of hard money loans are based on the value of the property that is used as collateral. They are not normally based on the borrower’s credit or financial situation. The individuals and companies that lend hard money loans are capable of seeing the potential value in this type of risky investment. Many people who seek out hard money loans may be property investors who are searching for funds to remodel a house. They are investors who will remodel the house, or “flip” it, and resell it to make a profit. They hope to make enough money to pay back the loan and gain a profit from the collateral. Since the terms of these types of loans are so short, the borrower will attempt to complete the project within a year.

Hard money loans may be quite risky, but the higher risk is offset by some of the other values that they offer. Since borrowers intend to pay off the loan quickly, the terms are normally between one and three years. If the loans are paid off quickly, then the interest won’t accrue. This means more profit for the borrower.

Pros and Cons of Hard Money Loans

Hard money loans often have a higher cost to the borrower than traditional loans secured from banks. This is a reflection of the risk that the lender is taking. In return for this high cost, borrowers have quick access to capital, less strict approval processes, and sometimes flexible repayment plans.

Pros

One of the critical advantages of hard money loans is the less stringent approval process. For traditional loans, many banks will require the lender to provide proof of income, a credit check, and a low debt to income ratio. This can cause many potential borrowers to be declined in the process. Lenders of hard money loans can also assist the borrower in a quick approval process. They do not have to jump through the hoops that normal banks have to for approval.

Many lenders of asset-based loans do not worry as much about repayment. If a borrower defaults on the loan, then they may be able to still sell the collateral and make a profit. Lenders often take this into account and are flexible with the repayment schedule for hard money loans.

When a borrower applies for a loan through a bank the terms are normally set in stone. With hard money loans, the underwriting process is determined on a case by case basis. This allows for some negotiation between the borrower and the lender. Each side may be able to create a better lending contract for themselves.

Cons

Since the collateral of hard money loans is only the property itself they often have a low loan to value (LTV) ratio. The LTV is a term used by lenders to compare the value of the loan to the appraised value of the property. These low LTV loans are not always favorable to the borrower.

Another disadvantage of hard money loans is the high interest that accrues if the loan is not paid within a certain time period. According to the Pew Trust Foundation, the interest rates can be as high as 15 to 30%. Most borrowers can only make payments equal to about 5% interest on their loans.

Resources:

Sasso, Michael.  “Home-Flipping Trend Weakens as High-Interest Lenders Jump 40%” Bloomberg. https://www.bloomberg.com/news/articles/2019-06-12/high-interest-lenders-up-40-even-as-home-flipping-trend-weakens. Accessed 11 Oct 2019.

“From Payday to Small Installment Loans: Risks, opportunities, and policy proposals for successful markets” The Pew Charitable Trusts Foundation. Accessed 11 Oct 2019.

 

 

Hard Money Loans: Cracking the Hard Situations

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When you’re dealing with hard situations and need help fast, a hard money bridge loan is the type of loan you may need. Many people are unaware of what a hard money bridge loan (1) is or how a hard money lender works. In its most basic terms, a hard money loan is a short-term loan secured by real estate. When you are racing against the clock to obtain a loan, hard money loans for your hard situations you can be approved sometimes in as little as 48 hours.

Length of Your Hard Money Loan

The length of your loan typically runs about twelve months, but lenders can extend it for two-five years in special cases. Significantly, using hard money loans for hard situations help crack difficult financial times.  The hard money loans are considered temporary and beneficial answers because you don’t have to pay the principal off throughout the life of the loan. You’re only paying the interest or the interest with limited principal through the loan’s life. When the loan term is over, you have a balloon payment due which includes whatever you have left on the hard money bridge loan to pay.

What makes hard money loans work, and be approved quickly, has everything to do with your property’s value. Hard money lenders may check your credit score, but they’re primarily concerned with the real estate property you’re putting up. Many hard money lenders use what’s called the loan-to-value ratio (LTV) to determine how much they will lend you.

How Fast are Hard Money Loan Lenders Growing?

It’s the LTV ratio that helps hard money lenders evaluate your loan risk. The more money they are going to lend you, the higher the hard lender’s risk. When you have assessed a higher risk based on your LTV ratio you will have to:

  • Pay a higher interest rate on your loan
  • You may be assessed additional costs, like fees or the lender may  need you to get mortgage insurance

But you won’t have any problem find a hard money loan lender. Hard money loan lenders are up 40% since 2016. There’s a lot of activity in the hard money loan markets. A hard money commercial loan lender knows each hard money loan will have different percentage rates based on how much the loan is and what their real estate property value is.

Crowdfunding companies are jumping on board to become hard money loan lenders too. They are loaning out millions of dollars at very high-interest rates which makes them a fortune. But that’s not the way the real hard money lenders like to do business. Most ethical, hard money lenders are in the business to help those who need quick loan approvals while making a reasonable profit for their business. Those hard money lenders approve their loans with a sense of fair play.

What are Hard Money Loans Used For?

Business is better than ever for hard loan lenders, but they try to “work with those who need them most.” This is usually in the low to middle housing and commercial markets. That’s the market where people who are hit with unexpected bills or events, don’t have the cushions of large savings accounts. Private money or hard money lending is also always good for certain populations or targeted groups like those who flip and flop houses. Hard money loans can be great for short-term or long-term investors who need their financing fast.

Many buy and hold investors will use hard money lending to buy and renovate properties before they refinance the homes through conventional loans. Another common hard money loan need is when long-term investors need to season their property. There are as many reasons as there are dollars to lend through hard money loans. But cracking the hard situations is done on a one-on-one case basis.

It’s not uncommon for your loan to be approved through a hard loan lender before you walk out the door. A prequalification can be faster than that. You can be prequalified in as little as three minutes. More importantly, you can get your funding, cash in hand in as quick as 10-15 days. It is the quick turnaround time, and the ability to take care of whatever emergency you’re dealing with that makes hard money loans so popular.

When You’re Ready

When your ready for your private money lender experience reach out to us. Find a hard money lender who has the expertise you need, with the interest rates and costs you can afford. You want your hard money lender to have the real estate knowledge needed to value your property fairly. Get a hard money loan with terms that help you deal with your hard situations. You can now take your first financial breath in a long time.

(1) https://www.fdic.gov/regulations/safety/manual/section3-2.pdf

What Do Hard Money Lenders Look For?

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For individuals seeking capital to purchase a new home, avoid foreclosure, or make renovations, a traditional bank loan doesn’t always work out. Things like a poor credit score or little equity can quickly lead to rejection. However, in recent years, hard money lenders have provided people with a way to get the money they need for real estate projects or to keep their homes.

Unlike banks who look at a borrower’s financial history when considering whether to approve a loan, a hard money lender uses the property as collateral. This means applicants have a much higher chance of getting approved for quick cash. House flippers often turn to these private lenders to secure a new investment before it’s sold. They’re great resources for real estate investors, especially when home sales are up as they are right now. According to the Department of Housing and Urban Development, sales for single-family homes saw a 2.5% increase from June to July in 2019.

However, even though hard money lenders are concerned with credit scores, borrowers should still know what they’ll be considering when evaluating their loan application. That’s why we’re going over some of the top things these lenders keep their eye on.

The Value of the Property Used as Collateral

Because the house in question will be used as collateral against the loan, one of the lender’s primary concerns is the total value of the property.  They need to know that if the loan isn’t repaid, they can recoup their losses. To do this, they’ll need to determine the loan to value ratio. This may require having an appraiser look at the property or having a real estate agent run a broker price opinion that will analyze the value.

If the borrower is seeking a loan to complete renovations on a home they own, the lender will determine how much the property will be worth after the upgrades are made. This is why house flippers often go after hard money loans. Lenders may also include land in the appraisal of the property as well.

It’s important to keep in mind that many hard money lenders won’t give loans for properties occupied by tenants. Potential legal issues could make the loan too risky.

The Borrower’s Commitment to the Property

The last thing a hard money lender wants is for the borrower to default on the loan. This is why they look at how committed the individual is to the property before approving the loan. Yes, the lender doesn’t care about a borrower’s credit score, but they still need to have confidence that the repayment terms can be met.

If a borrower needs the loan to secure the purchase of a home, the lender may want to know if they’ve put any type of down payment towards the property. If they have, the lender knows the borrower has something to lose if they don’t make their mortgage payments. This added reassurance goes a long way.

Lenders may also want to know what the borrower’s plans are for the home. If they plan on flipping it, what renovations do they intend to make? Once they sell the renovated home, what’s their plan for paying back the loan? Many house flippers have a portfolio of investments they’ve made. This is a good tool for securing hard money loans.

The Ability to Repay

The British economist John Maynard Keynes once said, “If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”  Hard money lenders must take this to heart. There’s certainly no surefire way to know a borrower will pay back the loan. However, lenders can look for at a few things that will help them determine whether the venture is a good idea.

Lenders often look at a borrower’s exit strategy for fulfilling the repayment terms. For example, if they’re using the loan to secure a piece of commercial property, the lender may want to know how they intend to start earning a profit. Lenders may also want to know how motivated the borrower is to pay back the loan. If a house flipper doesn’t intend to start renovations on the home anytime soon, a lender may be hesitant to approve the loan.

Hard money lenders are investors too. Because these loans have higher interest rates and shorter terms, lenders can use the repaid money for new loans. Looking at the items discussed above is the best way they can protect themselves.

Resources:

https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market-Indicators-Report-August-2019.pdf

Hard Money Brokers

Hard Money Brokers and Hard Money Lenders

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When you need money quickly, traditional loans are often not the best option because getting approval can be difficult. Many people who are looking to start investing in real estate turn to hard money lenders. Understanding hard money loans is important. This guide walks you through a few things you need to know before choosing hard money brokers.

Your Credit Score Isn’t Important

When you apply for a traditional loan, your credit score is considered to be very important. Hard money brokers aren’t as worried about it because you have to put down something as collateral before you can be approved for the loan. Traditional loans often require 7% as a down payment, whereas, you can use the property that you are buying as collateral or property you already own for hard money loans. The amount of loan you possibly qualify for will be dependent on the value of the property that you are using for collateral. The hard money lenders will typically provide you a loan that covers a portion of the overall value of the property.

Hard money loans are considered to be high risk. If you don’t pay your loan on time, the lender will have to sell the property in an effort to get their money back. If they approve a loan for the full value of the property, getting the money back if you default will be slim to none. According to Consumer Finance, for traditional loans ” Loan amount must be $484,350 or less in most counties and may be as high as $726,525 in high-cost counties. ” Hard money loans do not have such a stipulation.

Interest Rates for Hard Money Brokers are Often Hefty

Hard money lenders do not lend money to people out of the kindness of their hearts. The transaction needs to be profitable for them in order for them to make the loan. This means that they have to charge an interest rate for the loan that takes some of the risks out of it for them. Higher interest rates are attached to hard money loans than traditional loans. Since they require less stringent stipulations to be met, they can be easier to get. This often makes the higher interest rates worth paying for many borrowers.

Approval Takes Less Time

Traditional loans can take a long time for approval. Many stipulations must be met and then the lender, typically a bank, takes often more than a month to approve a loan. When you need money to buy a property that is up for auction or simply selling at a great price, you need to be able to get the money quickly. This is where a hard money loan comes into play. You can often get approved for a hard money loan within a very short period of time. This allows you to never have to miss out on great deals.

Your Loan Needs to be Repaid in a Timely Manner

Hard money loans often have the requirement to be repaired in a very timely manner. The loan agreement has stipulations for when the entire debt needs to be repaid. This is often just a few years or less. You don’t have to make a lump payment to pay it off though. Many people who use the loans do pay it off in a large payment when they sell the property. Most hard money loans are used in the house flipping business.

Choosing Hard Money Brokers Isn’t Difficult

Choosing a hard money lender to work with doesn’t have to be difficult. You simply want to work with a lender that has experience with hard money loans. An experienced lender will have the paperwork already created. They will be able to answer specific details when you ask them and get back to you quickly about whether or not you have been approved for the loan.

Before applying for a hard money loan, you need to know exactly how much money you need. Have an attorney look over the application to ensure that you understand the stipulations of the agreement. You need to be sure you know how much the loan will be for, how long you have to pay it back and what the interest rate will be. Once you are approved for the loan, you can buy your property and get started with your project right away.

Resources:

Consumer Finance – https://www.consumerfinance.gov/owning-a-home/loan-options/conventional-loans/

Down payment for traditional loans – https://www.nerdwallet.com/blog/mortgages/20-percent-mortgage-down-payment-dead/

Definition of hard money loan – https://www.investopedia.com/terms/h/hard_money_loan.asp

What Is a Hard Money Bridge Loan?

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A Hard Money Bridge Loan is a type of loan that is issued by a Hard Money Lender. It’s a private company or investment pool instead of a conventional bank. You may have heard about Hard Money loans because of their increasing popularity in the fix and flip housing market.  The most common situation it is used under is residential and commercial real estate transactions.

Didn’t know that money could be hard?  The term hard money comes from the idea that there is an actual hard value behind the loan.

Generally, it does not exceed 85 percent of the residential property value and 65 percent for commercial properties. Hard Money Bridge Loans typically having higher interest rates and shorter pay-off time periods.

What Purpose Does it Serve?

Are you contemplating a bridge of hard money right about now and wondering what it could possibly be used for? Allow me to give you the scoop. Bridge loans are used as a stop-gap for certain situations and is then repaid shortly after. Common loan terms are 12 months to 36 months.

Imagine this, you’ve found a house that needs some fixing and intend to flip it for a big profit. You go to the bank and get a big fat no, its too big of a risk. That’s where a Hard Money Lender comes in and offers a bridge loan against the value of the property.

You spend 6 months renovating and turn a nice chunk of change for your efforts. The loan is repaid with money from the sale.  You wouldn’t be the first one, flipping houses is now a $56 billion market and private or hard money lenders have plenty of hands in this cookie jar.

How it Can Help You?

“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises.” -Aristotle

Bridge Loans can be helpful for residential property owners as well as property investors. Sometimes a family may be selling their home with the intention of using the funds to purchase a new home.

If a hiccup occurs and the timing isn’t just right a family could find themselves missing the opportunity to purchase their dream home. A hard money bridge loan can fill a need until the old home is sold.

In certain situations, money is needed before permits have been finalized. A conventional bank won’t issue a loan until the ink has dried on permits. So how does a developer get started without any capital?

Getting a hard money bridge loan offers developers the chance to get the funds they need now and pay it back after a loan with lower interest through the bank becomes available.

Real estate isn’t the only customer of the hard money bridge loan, businesses that loose major investing partners take advantage too. If a stockholder pulls out their investment and the company faces certain death, a bridge loan replaces the lost funds and is paid back when a new shareholder comes into the fold.

Don’t Get Scammed

Be on the lookout for predatory lenders, while many Hard Money Lenders are honest and true there are still some bad apples in the bunch. USA.gov offers some helpful tips to protect yourself.

Some easy to spot red flags are lenders who offer to pay more than the property is worth, hoping that the loan will go unpaid so that they can reclaim the property.

Interest rates that are too low will generally be accompanied by unexpected fees to lure you into choosing their lending firm over others with higher interest rates. That firm turns a profit with undisclosed expenses. Keep your eyes peeled for firms that seek a loan insurance fee upfront or demand it in a strange payment method.

A general rule of thumb is no cash upfront, the majority of the fees will be processed at the closing of the loan terms through a title agency. Always question a lender who asks for money upfront for a loan insurance fee, these should be paid to the loan insurance company directly.

Lastly, vet your lender, cross-reference phone numbers with known scams. Speak with someone over the phone, visit the office or get a reference from trusted reviews or friends.

Sources:

https://www.forbes.com/sites/forbesrealestatecouncil/2017/12/05/how-the-rise-of-private-lending-is-reshaping-the-mortgage-market/#5a8a750552ae

https://www.attomdata.com/news/heat-maps/2016-year-end-u-s-home-flipping-report/

https://www.usa.gov/mortgages#item-36897

 

 

Hard Money Mortgage?

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Are you interested in a hard money mortgage? These asset-based loans could make a big difference to you if you’re hoping to pursue your real estate dreams. There are some things you should know about hard money loans before you sign on the dotted line.

What are Hard Money Loans?

Let’s start with the basics. You may be wondering what exactly is a hard money mortgage. Well, this is an alternative form of funding that’s oftentimes easier to secure than traditional mortgages.

Residential hard money lenders lend money to home buyers not based on their credit scores and credit history. They look at the value of their property. So, oftentimes hard money loans involve a private investor lending money to a buyer who isn’t able to secure a more traditional loan.

You often see hard money loans in cases of foreclosures and house flipping. Chances are you know someone or have at least heard of someone who is involved in home flipping. Just flip through HGTV and you’ll see lots of people who are making it big by buying run-down properties.  Then they complete the renovation before selling at a profit.

If that sounds like something you want to do, then hard money mortgages may be in your future. Traditional forms of funding can be good, but you have to qualify for them. The application process for these loans can be tough.

After all, banks and mortgage lenders need to look at your credit score and borrowing history to evaluate if you’re worthy of receiving a home loan.

That’s why hard money loans can be good. The process tends to be quicker with a better rate of acceptance, as long as you have that property value to back you up.

Of course, as with anything in life, there are some factors of hard money loans to think thoroughly about before jumping to any major conclusions.

What You Need to Know Before Getting a Hard Money Mortgage Loan

Before you secure a hard money mortgage, you need to think about your real estate and funding options. According to the U.S. Census Bureau, the median sales price of new homes sold in July 2019 was $312,800; the average sales price was $388,000.

You want to make sure a potential hard money loan would make sense for you financially.

Notable financial expert Dave Ramsey  said, “You don’t want to have so much money going toward your mortgage every month that you can’t enjoy life or take care of your other financial responsibilities.”

This concept certainly applies to hard money mortgages. Before you get such a loan, you want to ensure you can pay it back comfortably.

Due to the loan conditions, the interest rates on hard money loans are higher. Interest rates may be more around 8-11 percent depending on the lender. Most borrowers are looking to sell their property at a profit within five years. That way they can pay back the loan without too much interest.

Hard money lending usually has an LTV, or loan to value within 65 to 70 percent of the property’s value. With this low LTV rate, the lender can be assured that the property will sell for at least the amount owed against it in the case of a default. It’s pretty rare to find a hard money lender who will borrow you more than 70 percent.

What Should You do Next?

So, what does this mean for you? Hard money lenders are eager to guarantee that the property will be valuable enough to pay off an existing mortgage in case anything happens. Cross collateral for the hard money loan is one way the private hard money lenders can protect their investments.

You have to remember the increased interest rates while understanding that these higher fees are justified because of the risk factors. Private lenders need to protect their investment, the same way you need to protect your property.

If you have been struggling to secure a mortgage or you want to get into home flipping, hard money mortgages present a great opportunity.

If you are aware of the fees and interest rates associated with this loan hard money loans can help you tremendously. Speaking to a reputable hard money lender is a great place to start.

Sources: (Quote) https://www.brainyquote.com/quotes/dave_ramsey_520304?src=t_mortgage

“Dave Ramsey Quotes.” BrainyQuote, Xplore, https://www.brainyquote.com/quotes/dave_ramsey_520304?src=t_mortgage.

(Statistic) https://www.census.gov/construction/nrs/pdf/newressales.pdf

Cornish, Cheryl, et al. “New Residential Sales.” Census.gov, 23 Aug. 2011, https://www.census.gov/construction/nrs/index.html.

 

 

Commercial Hard Money Loans, Sign Over Your Real estate

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Money… There just doesn’t seem to be enough of it. How many people in the U.S. have absolutely zero debt? It would only be fair to guess not that many because if you think about it, isn’t all money kind of borrowing? The US is currently 22 trillion dollars in debt, and it doesn’t look to be going down any time soon. Now, with all this said, unfortunately, according to society and laws and such, money is not endless and even though it is great to be able to borrow it, the day WILL come where it has to be returned. So where does that leave us? Maybe time to start looking into commercial hard money loans.

What is a Commercial Loan?

If you have bad credit, getting a loan can be almost impossible. That’s where this brilliant solution of a commercial hard money loan may be your new best friend. Okay, but what is a commercial hard money loan? Right. Basically, if you own any real estate that is worth a decent amount of money, the bank can decide that its enough to allow you to borrow some more money.

This can be a savior for people to get back on their feet by catching up on their bills. It works because the loan allows for one larger payment, lowering the amount of interest paid, and therefore saving money!

“For a commercial hard money loan, the lending decision is based on the “commercial asset” (Property) as opposed to relying heavily on a borrowers credit, financials, etc…  The loan is secured by a first mortgage.” (Fairview Lending)

What are the Drawbacks?

Now as great as this sounds, and as simple as it may be seeming thus far, there are drawbacks. This solution can be known as a last resort effort because it is very drastic. This works when you need money quickly, but don’t want to give up your real estate…understandable. It is borrowing based on the value of the real estate BUT a risk of losing it if the loan cannot be paid back in the set period of time.

Another reason this is risky is because of the market. Think back to 2008 when everything was crashing and burning and the economy was terrible. If this happens to happen while on a commercial hard money loan, and the value of your real estate plummets, it can be hard to recover.

What’s the Difference From a Regular Loan?

According to Fairview Lending, there are very specific ways that a commercial loan is different than a bank loan. For example, a bank loan requires you to have a credit score of at least 700 whereas a commercial loan requires no credit score.

A bank loan can take up to 2-3 months for it to be put through the entire process and improved for you to get the money. Commercial loans take up to 10 days! The only thing you need to be eligible for a commercial loan is real estate. Banks require much more documentation including income, credit scores, tax returns, and financials.

Where Do They Come From?

Hard money loans are typically issued through companies or private investors and interest rates tend to be somewhat higher starting at around 7%. This is because of a shorter loan duration and a much higher risk. Clearly, there are many pluses to a commercial hard money loan, but also some factors that must be taken into account as well!

If you are trying to decide if a commercial loan is the right direction for you, it is important to weigh all of your options and really evaluate how it will help improve the situation, not just put it off for longer.

You’re Not Alone

One of the worst things to do when it comes to money management is put off paying loans or debts. This only ruins chances of getting more loans and hurts you from being able to even begin to pay off what’s needed. It is an easy trap to fall into, but the best solution available to you is to figure out what will help you pay off the most money, in the shortest amount of time.

Like mentioned at the beginning, most of us have debts because they come so easily…college, a car payment, buying a house, starting a business, etc. There is no reason to feel bad about it, just be smart and don’t think you can act like it doesn’t exist forever.

Sources

https://www.npr.org/2019/02/13/694199256/u-s-national-debt-hits-22-trillion-a-new-record-thats-predicted-to-fall

https://en.wikipedia.org/wiki/Hard_money_loan

 

 

Hard Money Funding Is It Right for You

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Hard money funding is one of many financial aspects you should be aware of, as this form of funding may come in handy for you when you least expect it.

Before delving into hard money funding and whether or not it’s right for you, it’s important to understand what exactly hard money loans are and what they can do for you. This specific form of asset-based funding is when a borrower receives money secured by real estate and property. Usually issued by private investors or companies, hard money loans are typically short-term with higher interest rates.

As a businessman and financial guidance extraordinaire Dave Ramsey once said, “You must gain control over your money or the lack of it will forever control you.” This rings true for situations involving hard money funding. After all,  you have to be confident and in control of your finances in order to ensure this borrowing agreement benefits everyone. Here are some of the important things you should know about hard money funding and the borrowing basics. With this knowledge, you can decide whether or not this is a funding avenue you want to pursue.

Fast Flexibility with Hard Money Funding

Let’s start with how hard money loans offer a refreshing alternative to tight traditional funding methods. There’s plenty of people out there who unfortunately have been turned away from banks and mortgage lenders to do poor borrowing capacity. Data from a LendEDU study found that 76% of people who apply for a personal loan are rejected, with a low credit score being one of the main factors. The average FICO credit score of an approved applicant was up around 741, while the average American falls short with a credit score of just 687.

That’s where hard money funding comes into play. Borrowers who are turned away from traditional lenders often find success with hard money loans instead, as long as they have the real estate/property investment to back them up. The process of receiving a hard money loan is quite short compared to lengthy bank applications. Plus, the terms of the loan are often suited for a quick turnaround. The majority of hard money loans are used for real estate endeavors such as house flipping. These are cases where you purchase a property and are quite confident you’ll be selling it for a profit within a few years’ time.

If you’ve been looking long and hard for the perfect property, and you’ve finally found it but now you need the money to get it into your name, hard money financing could suit your needs. Whether traditional loans won’t work because you have a less-than-stellar financial history, or if the property you’re purchasing is in need of heavy repairs and won’t qualify for regular loans, hard money could save the day.

The Funding Process of Hard Money

Private investors or investor groups are fond of hard money funding, as they have greater flexibility and freedom to support individuals with their real estate goals. Essentially, private investors have more wiggle room to work with than a traditional funding provider. This means you can approach a hard money lender and pursue your loan options rather quickly. The main thing you have to remember is that hard money loans have higher interest rates than other loans. What’s great about it is you will likely be selling the property in the next few years for a profit that will allow you to pay off the loan as anticipated.

Real estate investors are intrigued by hard money loans because the loan value is actually based on the expected resale value of the property. This means you would be able to get a 100% loan for the purchase of the property and the cost of repairs. For owners who are falling into foreclosure, hard money funding can give them the chance to fix their credit rating or sell their property without the stress of the bank breathing down their backs. As with any lender, hard money lenders expect to earn a profit from your property. This means you want to ensure you can meet the loan obligations and that everything is written down accordingly. Working with a professional hard money lender with a proven track record is the right way to pursue your property goals in a trustworthy financial situation.

What’s Next?

If you’re ready to further explore your hard money funding opportunities, it’s time for you to get in touch with a reputable lender who could help you. Exploring this path of funding is something you won’t regret, and it will open up new doors for a bigger and brighter future for you.

Brown, Mike. “The State of Personal Loans in 2018.” LendEDU, 31 May 2019, lendedu.com/blog/state-of-personal-loans-in-2018/.

Sweatt, Lydia. “19 Wise Money Quotes.” SUCCESS, 22 Mar. 2019, www.success.com/19-wise-money-quotes/.

 

 

Hard Money Commercial Lenders Don’t Come Looking For You

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In the world of financing, traditional mortgage companies run like the fast and loose crowd at a high school dance. Hard commercial money lenders are the hard-to-get ones, those who were too cool to even come to the dance.

If you need to find hard money commercial lenders, just know: they will not come looking for you.

Hard money commercial lenders typically are in a great financial position. They have deep pockets and vast reserves, and they do not need you to stay in business. They will not court you or coerce you.

However, you may need them.

Plainly put according to retipster.com, a hard money loan is a “short-term loan secured by real estate” and “funded by private investors as opposed to conventional lenders such as banks or credit unions.”

Slow and Tedious

Traditional lenders will require stacks of paperwork and documentation. They base their decision on how much to lend you based on your risk. What’s your credit score? What is your income? Your assets?

Because of the amount of data a traditional loan company requires, they take a painfully long time to decide if they will approve your loan.

Fast and Furious

Hard money commercial lenders work in a completely different way.

They gauge their decision to lend based on your assets, on the property that you’re putting up for collateral. This means if you default on the loan, you will lose your property unless you can sell it and pay back the lender.

Because they do not require documentation paperwork, or the research that involves your income, hard money commercial lenders approve or reject loans quickly.

Who Needs a Hard Money Commercial Loan?

If you have any amount of credit problems from the past including foreclosures and bankruptcies, you’re a candidate for a hard money commercial loan.

Bankruptcy and foreclosures are red flags for traditional lenders, warning signals that will put the reject stamp on your application almost immediately.

With commercial lenders, if you have the assets or property to make up for the loan you’re asking for, they will usually approve the loan because they know that one way or another, you must pay them.

With a typical loan, if you default, you can, in the worst-case scenario, file for bankruptcy. When you file for bankruptcy, your lender may or may not get paid.

Be aware though, that if you’ve filed for bankruptcy in the past, you cannot do this again if you cannot make your payments. The hard money commercial lender will foreclose on your property, and you will lose the asset.

Why Get a Hard Money Loan?

If you want a short term loan,  a hard money loan makes sense. House flippers, those who fix and flip homes, and thus own property for a short time, are great candidates for a hard money loan.

People who cannot obtain a loan through traditional means because of poor financial decisions in the past are also great candidates. Perhaps you’ve made decisions that have followed you for decades. You have your act together now, and you can make your payments, but still, no one will lend to you.

Meet the hard money commercial lender, the one at home playing hard to get.

However, hard money loans are expensive. Their interest rates typically range from 10 to 15 percent, depending on the lender and his location.  Current mortgage rates, however, rise no more than six percent.

Because of the interest rate, a hard money commercial loan works well in the short term. If you plan on needing a long-term mortgage but cannot secure it at this time, then use the hard money commercial loan, but consider refinancing once your credit score goes back up and you’re a good risk

Where Can I Find Hard Money Commercial Lenders?

If the hard commercial lender is playing hard to get, how can you find them?

Networks dedicated to connecting apt candidates to these elusive lenders can connect you to a variety of potential lenders in multiple states in the United States. So whether you live in Alaska or Texas, if you look, you’ll find the lender you’re looking for.

To learn more about hard money commercial lenders and their services, check out our blog.

Sources:

https://retipster.com/hard-money-101-everything-need-know-getting-started-hard-money-loans/

https://www.thebalance.com/hard-money-basics-315413

https://www.mortgagecalculator.org/mortgage-rates/current.php

Hard Money Equity Loans Can Help In A Jam

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So, you are in a bind. Maybe money has become temporarily tight. You feel the stress of the unexpected and do not know what to do. Perhaps, you are trying to flip a house that needs a little more work than you originally planned. Now you need the funds to cover you until you can sell the property. Perhaps, you have thought about taking out a traditional type equity loan but, your credit score is not what it used to be. You apply for the loan with hopes that you will be funded.

They start by running your credit report and checking your loan to value. Then, the bank tells you that even though you have enough equity, you do not qualify for any type of traditional home equity loan through their financial institution because your credit is not to their qualifications.

The big banks base most if not all of their decisions around what your credit ranking is. You could have 200% equity and a low score and they may turn you down. You know you can afford the monthly payments once you have gotten out of this bind. But, if the big banks will not lend you the money what other choices do you have?

In another instance, maybe you have the credit score but need the money faster. Hard Money Equity loans are fast funded. This may you can get funded and take care of what you needed the money for.

How Hard Money Equity Loans Can Help

Hard money equity loans may be the right option for your situation. If you have the equity, but your credit score is not enough for the big banks then you can look into Hard Money Equity Loans. Well, what are hard money equity loans? Hard money equity loans are loans you take using the equity on property or properties.

These type of loans are really good when you know you will have a quick return. This way you get the money and pay it back fairly quickly.

Hard Money Equity Loans are done through private parties. With how hard it is to get a traditional loan through your typically big banking establishment, hard money equity loans may become a more sought out type of loan. According to Lending Tree, “One percent of American families applied for personal or family loans in 2017, and 24% of those received at least one denial for their requested loan amount.”

What are the risks of Hard Money Equity Loans

Hard money equity loans often have high-interest rates. These loans have been known to have interest rates ranging in the high 10-15%. This means a higher monthly payment. When taking out the loan make sure it fits your budget. If you are unable to pay it back, there is a lot on stake.

Another thing to keep in mind is that most of these hard money equity loan private lenders will want to be at the first loan position. Rarely will the lender allow their status to be the second on the property. This is their protection in the case that the receiver of the loan defaults on the loan or foreclose.

What are Hard Money Equity Loans good for?

Hard money loans are typically used for the following:

  • Construction; maybe you want to add another room, dig a pool, roof repair and so much more. y take out a hard money loan to put into the property they are going to sell.
  • Land loans; Buying extra land to build on. Or perhaps, to just widen your current land.
  • Quick money; you need the funds right away.
  • Bad credit;  bad credit makes loans harder to obtain.
  • Vacations; You know you have a big vacation coming up and want to make sure you have enough funds to spend and enjoy yourself.
  • Renovating; maybe you are not flipping a property but want to just improve the asthetic of your current home.

The Federal Reserve Board offers some great insight into Home Equity including HELOC (Home Equity Line of Credit).

Whatever your need for the extra funds, a hard money equity loan may be the right choice. The loans are quick, easy and readily available if you have the equity.

References:

https://www.federalreserve.gov/pubs/feds/2007/200720/200720pap.pdf

https://www.lendingtree.com/personal/personal-loans-statistics/