Why Use Hard Money Loan?
Category : Hard Money Loans
A hard money loan (also known as bridge loan or asset-based loan) is a short-term loan secured by real estate. The lender underwrites primarily to the collateral value of the hard asset as opposed to a borrower’s credit profile. These type of loans inherently carry more risk from a lender perspective, and with that risk comes a higher interest rate than traditional bank loans. Hard money lending is more prevalent today as traditional lenders have pulled back, credit has tightened, and traditional financing has become more difficult to obtain.
Why should you consider using this type of financing?
Hard money loans are very useful for those real estate investors who need a short-term loan to purchase property that needs repairs or needs re positioned in order for the property to qualify for a refinance into a conventional loan. In general, this is one of the best financing methods for the borrowers who can’t go the conventional route due to the following reasons:
• Bad credit
• Can’t show w-2 income
• Recent foreclosure or short-sale
• Property in need of repairs
• Deal requires a short escrow period
One of the biggest advantages of hard money loan is available and easy to obtain for you. Borrowing from friends and family is great, but they can run out and you never want to miss a deal because you can’t find funding. This type of loan is typically used for short-term funding – usually 6 to 12 months. Interest rate of a hard money loan is slightly high than a traditional loan but profitable for real estate investors. For example, if you pay 12% to borrow for a year but pay it back in only 6 months, you’ve only spent 6% to borrow those funds. So it’s not much if you’re doing right things and making the end profit that you should.
Hard Money Is Fast And Easy To Obtain
On the positive side, hard money loans are faster to approve than traditional bank loans. Many hard money lenders can qualify you and get you funded within few days. When you stumble upon a great deal and time is of the essence, hard money loans are the right choice for you because traditional lenders just can’t move that quickly. You have to provide your tax returns, two months of pay stubs, bank statements, and many other documents to obtain a conventional loan, and it still can be harder if you have a less than perfect credit rating. On the other hand, perfect credit is not necessary to get a hard money loan, but you just need to have a good exit strategy and also you should have the ability to bring some of your own money to finance your project. Hard money loans allow you to borrow up to 70% of the property’s value.
Conclusion
Your friends or family members can run out of funds anytime, but hard money loans are always available so you don’t miss an opportunity to create profit. Nowadays, hard money loans have become most popular financing option for real estate investors and individuals to make real estate purchases.
The advantages of easy access, convenient requirements, and rapid processing allow you to make your dreams of real estate into a reality. If you have any additional questions regarding hard money loans, call Magna Capital Group, Inc at (310) 734-4044 or visit www.magnaloans.com.