Hard Money Mortgage Lenders Can Help Stop A Foreclosure

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Foreclosure is a homeowner’s worst nightmare, especially if their family’s well-being is at stake. Unfortunately, they happen more often than you think. According to data collected by the Federal Deposit Insurance Corporation, 250,000 new families enter into foreclosure every three months. The good news is, hard money mortgage lenders can provide options to people facing the loss of their home.

Unlike transitional mortgage loans given out by banks, hard money lenders are typically private investors. Instead of looking at a borrower’s credit score and financial history, they use the value of the property as collateral against the loan. This makes the approval process both easier and quicker.

In short, a hard money loan gives a homeowner the ability to pay off a mortgage and refinance or enter into a short sale, which are both better options than a foreclosure. To get a better idea whether this type of loan is right for you, let’s look at some situations that lead to foreclose and how hard money mortgage lenders can help.

Understanding Foreclosure

A foreclosure happens when a lender forces the sale of a home after the borrower fails to make monthly payments. The money acquired in the sale will go towards repaying the mortgage. This is a legal process that puts the borrower at a huge disadvantage

Most of the time, foreclosures result when a family experiences an unexpected setback. Job loss, medical bills, divorce, and overwhelming credit card debt are some of the most common reasons for homeowners to default on mortgage payments. Although lenders will often work with you if you’re having trouble, you won’t have much time to get current.

J.P. Morgan saw the positive side of foreclosure when he said, “Giving debt relief to people who really need it, that’s what foreclosure is.” Unfortunately, there are a number of consequences associated with having your home foreclosed on. Some of the most damaging include:

  • The loss of your home along with equity you’ve built up.
  • Damage to your credit score.
  • You may still owe a balance, even after the foreclosure goes through.
  • The inability to acquire a mortgage or qualify for property leasing in the future.

These repercussions make it obvious why preventing foreclosure is absolutely necessary. However, when you’re already facing so many financial problems, where do you turn? This is where working with hard money mortgage lenders can be a great benefit.

How a Hard Money Lender Can Help Stop a Foreclosure

Many people opt for taking out a second mortgage or getting a home equity line of credit when they run into trouble with their original mortgage. However, if you already have poor credit, this isn’t an option.

By applying for a hard money loan, you’ll get quick cash without having your credit and financial situation scrutinized. Hard money mortgage lenders look at the property value of your home along with the current market and use this as collateral. They don’t care about your credit score.

Now, one disadvantage of a hard money loan is you’ll only get a percentage of the total value of your home. However, if you use the money properly, you’ll come out on top. For instance, you could pay off the delinquent amount you owe on your existing mortgage and then some. Or, you could opt to use the hard money loan to pay off debt or renovate your home in preparation for a short sale.

In addition to not having to worry about your credit score, the approval process is very fast when working with hard money mortgage lenders. The traditional bank loan process is much more complex, which may not work if you need money right away.

Find Out if a Hard Money Loan is Right for You

It’s important to understand that hard money loans are meant for short-term solutions and typically carry higher interest rates than traditional loans. Think of them as recovery loans. However, when facing foreclosure, they can be extremely effective tools for opening up opportunities.

These types of loans have become very popular in recent years due to the freedom they provide homeowners facing foreclosure. Speak to a hard money mortgage lender and find out what type of interest rates and repayment terms they can offer. There’s a good chance you’ll get the peace of mind you need during trying times.

Resources:

https://www.fdic.gov/about/comein/files/foreclosure_statistics.pdf

 

 

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

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

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

 

 

Different Ways To Earn With Real Estate

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There are many different ways for someone to make money in real estate. It is for this reason that it is such a popular investment area. Lately, it has once again gained in popularity, but there are still a lot of people who don’t really know how to get into it and whether they have the finances to do it. The reality, however, is that it is possible to get into real estate investing without fantastic credit, million dollar assets, and a huge savings account. Rather, you could start a small escrow and get started straight away.

Escrow is a legal concept in which a financial instrument or an asset is held by a third party on behalf of two other parties that are in the process of completing a transaction. The funds or assets are held by the escrow agent until it receives the appropriate instructions or until predetermined contractual obligations have been fulfilled. Money, securities, funds, and other assets can all be held in escrow.

There are a number of different ways to get into real estate investing as well.

1. Long Term Residential Rentals

The majority of people who invest in real estate do so by becoming a landlord. Because people will always need a roof over their head, investing in residential properties is a pretty safe bet. Play your cards right, and you can use this not just as an investment in your future, but even for present cash flow.

Many people invest in rental properties simply because of the cash flow – the extra money that is left after all the bills have been paid. The cash flow can provide ongoing, monthly income that is mostly passive, allowing you to spend your time building a business, traveling or reinvesting in more real estate.

However, getting into residential investments will generally mean that you have to save up for a deposit, unless you can find a reduced property and use the equity in the house as a deposit.

2. Lease Options

A second option is to lease, which is particularly good for those who don’t have a lot of money saved up or whose credit is less than amazing. Specifically, investors will lease to own.

A lease purchase is a written agreement between a landlord and tenant giving the tenant an option to purchase the property at some future point in time.

One of the greatest advantages is that, once you enter a lease to own contract, the existing owner cannot change his or her mind anymore. This also means that, if the housing market changes, you could get a significant discount on the property at the end of your lease term. If that happens, you can immediately sell the property at that point and make an interesting profit.

3. Fix and Flips

The next option is to fix and flip properties, which can be a very lucrative investment. However, don’t let the popularity of reality television shows fool you into thinking that this is easy. To properly fix and flip, you need a contractor and you must inspect each property. You then have to go through the five stages of fixing and flipping.

These steps are choosing the right neighborhood, checking housing market statistics, verifying the condition of the fix and flip properties, forecasting the overall budget, and calculating the potential profit.

Being successful in fixing and flipping means being very good at math. You have to calculate how much you will spend on the property and how much you will then need to sell it for in order to make a profit. The best investment properties are those that are selling for little money and that don’t require a lot of fixing, but they are also the hardest to find.

4. Contract Flipping Options

If you do not feel comfortable taking full responsibility for a fix and flip, you can venture into contract flipping instead.

Flipping a real estate contract involves transferring your interest in the contract (also known as assigning) to a third party.

In very simple terms, it means that you find a seller who is desperate to sell and put them in touch with a buyer who wants to make a purchase today. You then charge a fee for bringing these two together. Essentially, you won’t invest in actual real estate assets, but rather in contracts between those who want to own real assets.

5. Short Sales

The short sale option is quite tricky and difficult, but the potential for return is tremendous. In a short sale, someone who has defaulted on his or her mortgage hasn’t quite gone into foreclosure. Rather, the bank agrees that, instead of pursuing foreclosure, they will allow the house to be sold for less than what is still owed, which is generally much less than the actual value of the property. You need to have very strong negotiating skills to achieve this.

This type of sale is difficult and tricky, but it can bring in a huge return. This can happen when homeowners are behind on their mortgage, but the mortgage hasn’t actually gone into foreclosure yet. In order for a short sale to happen, everyone needs to agree because the amount will be less than what is still owed on the mortgage. You then negotiate a fair price that is acceptable to all parties.

6. Hard Money Lending

There are two ways to get into hard money lending: borrow money to purchase real estate or lend money to those wanting to get into real estate. Both options have their pros and cons, with the biggest disadvantage being the riskiness of the lending environment and the biggest advantage being the speed with which these loans are completed. Hard money lending is needed for loans on properties that banks will not touch, which include short sales, foreclosures, and fix and flip properties.

7. Commercial Real Estate

Getting into commercial real estate usually takes a great deal of money, not in the least because of the size of the properties, which means they are expensive. Not just that, they must often be fully repaired and renovated, after which they can either be rented or leased out, or they can be sold. Commercial real estate is a popular investment because there is a tremendous demand for it, particularly in certain up and coming areas. However, it is also incredibly risky due to the high expense involved in it.

How Important Is Private Lending In Commercial Real Estate?

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It was almost ten years ago when the global financial market crashed. Since then, a lot of things appear to have changed. Among those that have been affected the most is commercial real estate (CRE) lending, with loans now coming primarily from private lenders. Every quarter, people the world over continue to feel the effects of the Great Recession, despite it supposedly being behind us. And, as 2017 comes to an end, commercial borrowers continue to have to manage some significant financial complexities. Those include uncertain world affairs, a changing regulatory climate, and higher interest rates. What all of that means is that it remains difficult to secure commercial credit. Today’s lending standards are also tighter than they have ever been.

Well-established borrowers with long track records can still go to their banks and get financing. Regulations have made it more challenging, but if they have sufficient equity and well designed and capitalized projects, there are financing sources for the project.

However, financial investors are resourceful if nothing else. They are now in a unique position, and it is one that sees to have attracted private lenders to the commercial real estate market. The options offered by traditional banks simply aren’t realistic anymore, and this means investors have to look elsewhere. The result is that a range of new institutions have formed as well, including real estate developers, venture funds, insurers, and hard money lenders.

There are some key advantages to taking out a private money loan, not in the least that it provides a lot more room for movement in the CRE market. In addition, borrowers have found that a lot of these lenders are trustworthy and beneficial to them. The result is a significant impact on the CRE market as a whole, and it now looks as if private money is filling the gap left behind by the financial crash of 10 years ago.

How Is Private Money Helping?

It is quite obvious that there has been a significant increase in the number of private lenders that are becoming involved in the CRE market, and the existing statistics show this, too.

The silver lining for U.S. commercial properties came from the comparative strength of the U.S. economy and higher yields of U.S. assets. With global economies having slowed down in 2016, U.S. property markets remained a favorite destination for cross-border investors. While top-tier markets in gateway cities continued as major targets of investor activity, the higher yields and advancing economies of secondary and tertiary markets offered viable alternatives to investors looking for stronger returns.

That being said, it is very important to understand the impact of this on overall market activity. As such, the first key issue that is obvious, is that CRE investors and CRE developers continue to be heavily involved in the overall real estate market. However, they no longer have as much access to traditional lenders as they did in the past. This is due to traditional lenders choosing to be more cautious and also by new regulations, such as the Dodd-Frank Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed by the Obama administration in 2010 as a response to the financial crisis of 2008. The act established a number of new government agencies tasked with overseeing various components of the act and by extension various aspects of the banking system.

Of course, the Dodd-Frank Act is now in question again, as President Donald Trump has, so far unsuccessfully, attempted to repeal it in its entirety, to be replaced with the Financial CHOICE Act.

If we want strong economic growth and more freedom, we must empower Americans, not Washington bureaucrats.

However, much of the Dodd-Frank Act will stay in place and while the Financial CHOICE Act will be implemented, the reality is that investors will have to continue to look towards alternative lenders if they want to fund their CRE investment projects.

The Potential Pros and Cons of Private Lending in CRE

Lending always comes with risks. However, with private lenders, there is a different systemic risk associated with it. This was, in fact, a key lesson learned from the 2008 crash. Large lending organizations were classed as “too big to fail”, and this caused the Big Bank Bailout.

The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail.

Private capital, if there is another burst of the real estate bubble, can quite easily absorb this. Only two players will be affected: the private lender and the investor. This is very different from an entire bank going under.

Yet, at the same time, there are some negative issues as well, one of those being that a lot of private investors are foreign investors. In fact, many of them come from China, as well as Canada and Europe. Clearly, the US market is seen as a safe market, but there will come a time when these investors start to see their own domestic market as safe again. This could have a significant impact on real estate investment trusts (REITs) further down the line, and the overall impact this could have on the market itself would be significant, albeit in theory.

What’s in Store for Private Money Lenders?

To date, the fact that the economy has strengthened has not resulted in more commercial credit becoming available from traditional lending sources. Hence, it is feasible that the last quarter of this year could see some real changes to what the lending environment looks like. There continue to be significant changes in financial regulations, and it is now also seen that interest rates are finally rising again. This means that, perhaps, traditional lenders will become friendlier to investors once again. Whatever happens, however, it is vital that the lessons learned from the financial crash and the benefits offered through private money since then continue to be at the foreground of their work.

The Difference Between Hard Money Lenders And Traditional Mortgage Brokers

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Technically, a hard money lender is a type of mortgage lender but they are very different from standard banks. Generally speaking, hard money lenders are private individuals, which means their systems are somewhat different to that of regular banks and brokers. It is important to be aware of the differences if you are a real estate investor, because you may find yourself having to use a hard money lender. Read more

The Pros And Cons Of Taking Out A Hard Money Loan

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Hard money lending is quite a unique form of lending. It is generally used for real estate transactions, but goes outside of traditional mortgages and other such lenders. Usually, the money is provided by investors, which can be individuals or groups, who are looking at the feasibility of providing short term loans with relatively higher interest rates. If a traditional lender denies someone a loan, or if someone needs money fast, then hard money may be the best option out there.

Understanding Hard Money Loans

No matter what type of loan you take out, the lender will want to have proof that shows you can afford it. Generally, this means looking at your income and credit score. If you have a good history that shows you have repaid your debt, and you have a good debt to income ratio, then most lenders will approve you. However, determining this is a long and slow process, even if you have a fantastic income and perfect credit score. On the other hand, if you have a few negative marks, or a complex form of income, then things take even longer and you may even get declined.

A hard money lender looks at things differently. What matters to them is your collateral, which they will secure the loan against. This means that your repayment ability is a lot less important. Should you find yourself in financial difficulties, the lender will simply take your collateral and sell it on. Hence, it is the value of this collateral that is the determining factor, not your personal financial situation.

A loan of “last resort” or a short-term bridge loan. Hard money loans are backed by the value of the property, not by the credit worthiness of the borrower. Since the property itself is used as the only protection against default by the borrower, hard money loans have lower loan-to-value (LTV) ratios than traditional loans.

In most cases, a hard money loan is a short term loan, lasting no more than five years. They have very high interest rates, which is why most people wouldn’t want to have the loan for longer than absolutely necessary anyway.

Why Should You Consider a Hard Money Loan

A hard money loan is very costly, and that is its greatest disadvantage. However, there are a number of situations in which it can be very beneficial.

Hard money loans are right for both short-term investors and long-term investors. Specifically, hard money loans are used by Fix-and-Flippers, Buy-and-Hold Investors, and Portfolio Investors.

There are a number of key reasons as to why these types of investors would look to hard lending:

  1. Speed – Because the focus is on collateral rather than financial positions, a loan can be approved and closed very rapidly. Naturally, these lenders don’t want to repossess your property, but they have a lot less risk as they don’t have to verify your income. You build a relationship with a lender and the process is then incredibly quick.
  2. Flexibility – Hard money loans don’t go through regular underwriting processes, evaluating individuals instead. You have the possibility to change your methods of repayment, not in the least because you are likely to work with an individual, rather than a huge national bank that has stringent policies.
  3. Approval – Since these types of loans are secured against a piece of property, you can generally borrow as much as the value of your property. Negative pointers on your credit report, such as past foreclosures, are much less important. While lenders will usually view your credit, they won’t generally base their decision on that.
  4. Low LTV (Loan-to-Value) ratios. Usually, you can get an LTV of between 50% and 70%. While this means that you do need some assets, the ratio is much lower than what it would be on an investment property with a traditional lender. Again, this is because the lenders know they can get their investment back quite easily should you not pay back.

When Should You Consider a Hard Money Loan?

A hard money loan should only be taken out for short term loans because of their high interest rates, as stated. This is why they are so popular with fix and flip properties.

Hard money lenders will charge 2-5 points and 12-18 percent interest, although some hard money lenders will allow a smaller down payment and finance some repairs. The catch is hard money lenders like to work with experienced flippers and usually only offer their best loans to repeat customers.

With fix and flip investments, a property is purchased, fixed, and sold within no more than a year in most cases. The goal is simply to purchase a property and sell it for a profit in as short a time as possible. If the property isn’t sold, and investors decide to live there while waiting for the value to increase, they will generally look at a refinance option so as to get better value.

The Disadvantages of Hard Money Loans

While the hard money loan has some key benefits, it has some drawbacks as well. The biggest is that it is a very expensive form of lending, which means lenders must anticipate significant profits if they want to end up with profit. Furthermore, the way that properties are valued is also often different from traditional lenders.

The interest rates on hard money loans are incredibly high. This is why these loans should be considered if you are sure that you won’t be accepted anywhere else. There are numerous loans available for people with poor credit or complex income scenarios, and you may want to consider those first, even if they take longer to close. An FHA 203k loan could be an option, for instance.

An FHA 203k loan is a loan backed by the federal government and given to buyers who want to buy a damaged or older home and do repairs on it.

How to Find a Hard Money Loan

In order to be accepted for a hard money loan, you have to find an investor. This means you have to research who offers this type of money in your local area. Real estate investor groups and real estate agents are usually a good place to get those important connections. Make sure you speak to a number of different lenders before you decide to sign up.

Hard Money Mortgage Loans – Check Them Out

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Do you need financial help to pay off your mortgage? Most people aren’t able to get a loan through traditional lenders like banks and credit unions. Read on to learn more about how hard money mortgage loans can be the answer to your recent financial troubles.

Why You Need Hard Money Mortgage Loans

Did you lose a good job or get a reduced income? When your financial situation changes, you can have a difficult time paying off bills that used to be easy. After so long, this could lead you to become at risk of getting a foreclosure on the house you love.

So, what are your options? Traditional lenders usually won’t let you borrow money from them when you are close to foreclosure. They also take too long to approve the loan you might need right away. This is where hard money loans can help you when you have gone over all other options. It might be your only hope if you want to keep the house and prevent foreclosure from being on your credit history.

Who Are Hard Money Lenders

Hard money mortgage lenders are individuals or a group of investors who allow you to borrow money from them when you need it most. It’s usually for those who have already tried and failed to get a loan through banks, credit unions, and other avenues.

It can also be beneficial for those who just got a new job that pays a lot more than your current one. The increase in your income can help pay off the hard money loan and allow you to keep the house.

Why Hard Money Lenders Risk It

You need to put some property up as collateral for them to approve you. Whatever property you put up as collateral is the one the hard money lenders use to value how much you get for your loan. They can’t risk lending money to you without having something on the line for you to lose. If you can’t repay the loan, they can take that property and sell it. Therefore, they will take the risk with you since they can still profit from you even if you don’t repay them as planned.

If you can’t repay the loan, they can take that property and sell it for their profit. An excellent way to get them to approve you is to show them how you will repay the loan you borrow from them, especially if you give them a thoroughly written plan.

Hard Money Loan Terms

You can apply for a hard money loan online, which is a fast and easy process. People don’t even need to have a good credit history to qualify for this loan like traditional ones. As reported by the Financing Strategies For Real Estate Investments, “they will lend based on the strength of deal and not so much on the ability of the borrower to pay it back.” So, you can have a bad credit history and still be eligible to get a hard money loan.

The downside is that borrowers have to repay a lot more with hard money lenders than traditional ones. According to the Financing Strategies For Real Estate Investments, these lenders usually charge from anywhere between 8 to 18% interest rate. They might even charge you points, which means each point they charge will amount to one percent of the amount you borrow. This implies the total amount you owe could be more significant than you initially thought.

Getting the Best Deal

You should always try to find reputable online hard money lenders. Ask for referrals or search reviews to see which ones are legit and have a good reputation. There are plenty of scams out there to be wary.

There are a lot of great lenders out there. Don’t settle for the first one who approves you for a loan. You need to wait and see which one offers you the best deal possible. Hard money lenders will have different rules regarding interest rates, points, and any other fees that you might not have thought of before.

Therefore, you need to read the fine print before signing the deal. Another smart alternative is hiring a professional who is experienced with hard money mortgage loans. They can help prevent any misunderstandings that will have you regretting getting a hard money mortgage loan.

Are Hard Money Mortgage Loans Worth It?

Do you want to save your house from foreclosure? It’s really up to you and your family if you think hard money mortgage loans are worth all the negative aspects that come with it. However, if you don’t want to lose your home, it might be your only option. So, research today and find out if this loan is for you and your family. It could be the best decision you’ve made in a long time!

Sources: https://sbnk.senate.ca.gov/sites/sbnk.senate.ca.gov/files/final%20backgrounder.pdf

 

 

Finding Hard Money Lendors

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Buying and flipping houses has become increasingly popular in recent years due to the numerous shows on television showing that it can be a lucrative investment to make. Unfortunately, the shows neglect to tell you how the flippers fund their projects. Many turn to hard money lenders to get the money they need quickly and easily. Unlike traditional loans from banks, you often don’t need to wait weeks for approval for the loan or have a great credit score. The loan is often based off of some sort of collateral, which can be the property you are buying. Finding hard money lenders doesn’t have to be hard to do though. The following guide walks you through a few things to look for when you start your search for a hard money lender.

Search for Local Lenders

It’s important to look locally for a lender. There are many times when lenders want to look at a property before they invest in it. It allows them to make sure that there is a potential for a flip to be a lucrative investment and that you aren’t asking for money than is really needed.

Search for Lenders with a Proven Track Record

Many people are trying to get into hard money lending because it is proving to be very lucrative. It’s a good idea to find lenders who have been in the business for an extended period of time so that you can talk to others who have worked with them before or at least read reviews about the lenders. You need to be sure that they don’t change the interest rates over time or overcharge the clients.

Search for Lenders that Allow Access to Loan Information

A professional hard money lender will be completely transparent. They will allow you to see all of the information on your account at all times. This allows you to track when payments are due, how much you have paid toward the loan and when payments need to be made. This allows you to be sure that every payment is tracked properly.

Search for Lenders with Reasonable Interest Rates

It’s important to know that hard money loans often have higher interest rates than traditional loans. You still need to make sure that the interest rate is reasonable for your loan. The average interest rate for a hard money loan should be between 10% -15%. The reason the interest rates are so high is because the loan is designed to be quickly repaid and is a huge risk for the lenders. The lenders are using the property as collateral for the loan, if you default, they will have to put in a lot of effort to get their money back, thus the need for the high-interest rates.

Search for Licensed Lenders

There are scams in the real estate investing market, so you need to take the time to look for lenders who are licensed. These lenders will have taken the time and put in the effort to prove that they are a reliable lending source. You can contact your local attorney general’s office to find out if a lender is licensed and registered in your state before doing business with them. Doing your due diligence could save you a lot of money in the long run.

Search for Lenders Who Meet in Person

Some lenders claim that you can get approved over the phone in just minutes. According to the Federal Trade Commission, “It is illegal for companies doing business by phone in the U.S. to promise you a loan or credit card and ask you to pay for it before they deliver.” It may be tempting to work with a lender that allows you to apply and get approval for a loan without having to go through the hassle of meeting people, but it’s an illegal practice that you need to avoid at all costs.

Take the time to do thorough research about any lender before applying for a loan. You want to be sure that you have read reviews from other borrowers, determined if they are licensed and registered and have the contract looked over by a lawyer before agreeing to any terms within it. This protects you from having to pay more than you should for the loan or getting taken advantage of all together.

References:

Federal Trade Commission (August 2012). Advance Fee Loans. Retrieved from:  https://www.consumer.ftc.gov/articles/0078-advance-fee-loans

Hensel, Don. Hard Money 101: Everything You Need to Know About Getting Started with Hard Money Loans. Retrieved from: https://retipster.com/hard-money-101-everything-need-know-getting-started-hard-money-loans/