Category Archives: Hard Money Loans

A Look at Hard Money Loans For Home Purchase and Residential Hard Money Lenders

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Category : Hard Money Loans , Real Estate Loans

Hard money is a way to secure property in a short period of time then refinance into conventional finance and can provide an alternative source of financing for real estate investors. Conventional institutional lenders will not finance hard, hairy loans and on the other side equity investors demand very high returns and/or shares of profits.

Investors who borrow hard money understand that this type of loan is more expensive than conventional loans. A hard money borrower perceives that the loan’s value extends beyond its cost. Investor rehab loans are particularly easy to find with a number of competitors but at the same time you should watch out for the hard money lenders that are also wholesalers.

The Lenders

Lenders of so-called “hard money” are becoming more common and more accessible: Perform a search for “Las Vegas hard money lenders” and you will discover many results, many for the state of Nevada, specifically. There are even private lenders based online, at your convenience.

Lenders have much stricter criteria these days, and for a good reason. In today’s society, the laws favor consumers, not banks. So lenders turn to look at whether or not the applicant is worth the financing and if the business plan is practical. They can scroll through the list of entrepreneurs and make a selection based on the person they wish to lend money. Most loans when approved are made via credit card or PayPal.

Most lenders ask borrowers to pay a minimum of five percent upfront deposits, as a guarantee. The greater amount of deposit will shrink your interest rates and mortgage payments under most circumstances. Lenders want the loan to be current, not to have to complete a foreclosure. But can you make up the defaulted amount over a period of months?

The Borrowers

Most people apply for hard money loans when they have credit problems, are in default, have had a foreclosure or bankruptcy, have been recently unemployed, or for some reason cannot provide proof of income.

Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding. If you feel you have been the victim of unfair practices, contact your state’s attorney general office or the office of the state in which the lender operates.

Some borrowers love to use hard money lenders on all real estate deals. Borrowers of hard money loans qualify based on the value of their property more so than the quality of their credit history. However, there is a market out there that hard money lenders cannot fund. So make sure you do your research right before taking on a hard money loans.

Factors to Consider Before Getting a Hard Money Lender

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Category : Hard Money Loans , Home Loan , Real Estate Loans , Residential Loans

While the hard money lender cannot be compared to a bank, you can place certain measures into place in order to ensure you don’t get duped when getting a loan from them. This is a non-traditional loan and it comes in handy when you need to get private loans. For the purpose of ensuring you make the right choices, it is advisable to consider the following important factors.

    • Experience: Find out the duration the lender has been in the market and the number of successful deals they have closed. In this case, you can look at their expertise and the type of customer feedback they have before making your decision.
    • Industry connections: This refers to the investors and lenders they work for. In this case, it is important to ensure that they are well connected and they have the purpose and tools needed to ensure you access your cash without any difficulty. Keep in mind that those with many connections are able to get ready cash fast and this ensures that the job is completed within a short duration.
    • You need to look at your local estate market. If it is performing poorly, there is the possibility that the rate for the cash is going to be higher as well. Always take time to carry out thorough research your local market keenly in order to ensure you make a decision that is in your best interest.
    • References: In this case, it is imperative to ensure they are competent and what better way to confirm this than talking to people who have used the services before you. They will give you an account of personal experience and this will ensure that you get a lender that offers a deal that works well for your needs. If need be, make sure that you carry extensive and thorough research. Do not stop until you are certain that the choice you get is in your best interest.
  • Prepayment penalties: Before getting private loans, it is important to ensure you get a clear picture of the prepayment penalties. Note that this depending on the lender selected, you might be expected to pay this or not. Prepayment penalty refers to the fee you incur incase you don’t make your payment as agreed. For the purpose of ensuring that you are not subjected to any unpleasant surprises, it is important to confirm this amount with the hard money lender. In most cases, it is advisable to settle with one that does not charge such fees.

Always, before seeking to use these services, it is also advisable to ask them if they have state licenses. Every lender is supposed to have one and if this is not the case, then don’t use the services.

Don’t Get Burned By Commercial Hard Money Lenders!

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Category : Commercial Loans , Hard Money Loans , Real Estate Loans

There might come a time in your investing career that you will need to use commercial hard money lenders. Hard money is used when you need to get quick short-term financing. The rates are usually high and the LTV’s very low (to account for the risk involved in these types of loans). These loans are usually tied directly to the property value (however, lenders also look at the borrower’s credit history, personal financial statement, etc–they use this information on determine your rates and allowable LTV). Some people are scared to even think about getting a hard money loan because the rates are so high– but that shouldn’t stop you if the numbers make sense.

The commercial hard money industry is full of reputable lenders as well as sharks. And it would surprise you to find out who the sharks are! They are the ones with all of the slick advertising that promise you everything but never deliver (but they do manage to keep a nice chunk of your money!).

I have heard a lot of horror stories, from not closing on time to losing hundreds of thousands of dollars.

So how do you avoid being a casualty on this battlefield of commercial hard money lenders? Read on and I will share with you tips from past clients as well as my own personal experience.

PITFALL #1 – Not Using a Commercial Mortgage Broker

So you think you will save yourself some money by not using a commercial mortgage broker, but trust me, you will spend more in the long run. The broker is the expert you need to rely on. Not only will they know different sources of funding but they will also know which ones to avoid. Brokers also have a fiduciary responsibility to act in your best interest, so they should understand the process and know the lender. Typically, brokers will charge you 2 points to broker the loan.

PITFALL #2 – Not Having a Lawyer Review Your Documents

A Broker has a fiduciary responsibility to act in your best interest but they are not an attorney. Before you sign any contracts and pay any money to the lender, have your attorney review the documents. Most lawyers will review contracts for a small fee (depending on how large the contract is) and it will be worth your investment. Not only do you want your lawyer to review the documents, but also have them explain them to you in “plain english”.

PITFALL #3 – Paying Too Much Money Up Front

You can expect to pay some initial up front money (for appraisals or other inspections), but it shouldn’t be an exorbitant amount. Also, you need to know if the money is refundable or not and under what circumstances. Do you have to pay for site visits (other than appraisal)? Is any part of that refunded if the loan doesn’t close? This is usually where most of the heartache comes from…you have given them a large sum of money and it turns out that it isn’t refundable!

PITFALL #4 – Not Performing a Background Check On the Lender

Once you know who the commercial hard money lender is (if you’re using a broker, they won’t tell you that until you have signed a fee agreement) check the state that they are licensed in for any complaints or lawsuits. Most people do this step after they’ve lost their money and they are preparing a lawsuit! I suggest you do it before any money changes hands.

Using commercial hard money can be a beneficial solution to your investment strategy, but you want to make sure that you know what you’re getting yourself into, so that you don’t get burned.

Private Hard Money Loans

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Category : Hard Money Loans , Real Estate Loans

Private hard money loans used to be a small segment of the financial world. Reserved for those with poor credit, these loans have traditionally been a last resort for many. In addition, many well qualified borrowers would not have considered this option in years past.

With the turmoil in the financial markets these days, however, all of that has changed. These days, private money loans are a viable option for even the most well qualified borrowers. Excellent credit, large down payments or a large amount of equity in a property are becoming the new private money norm rather than the exception.

It used to be that credit played no role in this type of lending. If you had equity and a pulse, someone would make a loan for you. These days, however, poor credit can play a role in dictating your approval with a hard money lender. While poor credit may not deny you a loan, it could require a much more conservative loan than you may expect. At the same time, borrowers with excellent credit and assets are finding that their normal banking relationships are not able to secure the financing they need. Due to this, they are turning to hard money options.

Many people considering this type of financing for the first time may be surprised by the terms. Typical terms on this type of financing can range between 9 and 14 percent, in addition to points being charged on the transaction that can range anywhere from three to seven or more. This is expensive money, but in these times of tightened credit, savvy investors realize that it is still much cheaper than taking on a partner.

Hard money loans are typically funded by a private individual. Sometimes you can have multiple individuals who fund a particular transaction, in which case it is referred to as having multiple beneficiaries. The benefit to this structure for those private investors making the loans is the high rate of return and the security of the real estate that is being used as collateral. With the strict lending guidelines the banks have these days, private investors can make double digit returns, while staying at a 50-60% loan to value. This means they are lending a maximum of 60% of the value of the property, keeping a safe buffer of protective equity.

The benefit to the borrowers is the ability to actually borrow funds. Although the interest rates being charged can be in the double digits, the ability to leverage in this real estate market often times outweighs the cost of funds.

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