Hard Money Loan – How to Get It?

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Hard Money Loan – How to Get It?

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Category : Hard Money Loans , Real Estate Loans

Believe it or not but getting hard money loans are very easy – IF you know where to find it. The easiest way of finding hard money lenders is through web.

It is important to realize that there are many companies, which claim to be a hard money lender but they aren’t in a true sense.

The reason behind getting hard money easily is because you don’t need to go through the conventional requirements of showing your credentials, such as job or credit history. Hard money loans are ONLY given on the basis of property you are buying.

That’s why, it is better to stay away from the places which will ask for a credit score requirement or bank statement before qualifying for the loan.

All the lenders will check your credit report or documents at some point of time but true lenders will only evaluate it to determine your interest rate, origination points and the duration of loan.

Another place to look for a hard money lender is your local REI (Real Estate Investment) club. You can talk to the other investors and find out whose services they are using.

OK, so I have given you some tips here about finding a hard money lender. Now, I would like to answer the main question.

Getting a loan is absolutely different from getting a traditional mortgage for your personal residence. You can only apply for loan after you have taken the property under contract that you are willing to buy.

True lenders work really fast and they can fund you within 7 business days as well but they can’t tell you the exact loan amount, until you show them the property.

As long as you haven’t faced bankruptcy in the last 24 months or you don’t have any current tax liens, you could easily get a hard money loan.

Few things which acts as a hurdle for those who submit their first application are:

1) The amount of loan you’ll get from a lender would be different from what you need.

Hard money lenders usually lend up to 70% of the estimated ARV (After Repair Value) for the property and this amount could be used for purchasing and rehabbing the property.

They will send independent property evaluators who will determine the ARV. A real lender will consider at least 10 comps before finalizing an ARV for the property you want to invest in.

This could be a bit different then what you have expected. If your purchase price and rehab costs are more than the 70% ARV, then you will have to bridge the difference yourself.

This is the biggest mistake which investors make. They think that if a lender is advertising that they will finance 100% of the purchase price and rehab costs, then it would work every time.

But that’s NOT the case. For getting 100% financing, you need to have your purchase price and rehab costs within 70% of ARV.

2) No proper planning for loan fees or origination points.

Hard money lenders are paid on loan points. There’s no other way out. They can’t fund you for points and it is usually of 00.

The borrower will have to pay for those points at the closing table if they want funding.

Even if a lender is advertising “no money down”, they are basically talking about the loan, which doesn’t include points.

Hard Money – Things You Should Know As an Investor

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Category : Hard Money Loans , Real Estate Loans

First and foremost, hard money is the money lend by private investors based upon the asset and not the borrower. It is quite easy to get and is called hard because it is based upon the hard assets, such as property.

It doesn’t ask for the typical requirements like other traditional lenders do. Hard or private money lenders don’t care what was your credit history or job history. They just care about whether the property is good enough or not and if they would be able to make good profit on it.

Their security is based upon the assets you have and not particularly based upon the borrowers. That is why, they are called “hard” as they lend upon hard assets.

There are few hard money lenders who ask for the background of the borrower as well and they ask for some of these income and credit related details but then, they can’t be termed as true lenders.

True hard money lender’s security is based upon the asset. They give loan to an investor because they believe in the property.

Let’s discuss the different types of lenders currently working in the market:

1. Business Lenders – They lend based upon the business and they usually look for cash flows or accounts receivables within that particular business and lend according to that.

2. Commercial Lenders – This is also based upon the assets, in particularly commercial properties.

3. Residential Lenders – This is for single family houses, duplexes, threeplexes and fourplexes.

You have to choose amongst these, which suits you the best. Basically, they can be divided into two, i.e. lenders who lend based upon the real estate and lenders who lend upon other things except of real estate.

So, if you want hard money loans for your business but you want it to be secured against real estate, then you need to look for lenders who deals in real estate and not in business.

Another important thing to realize here is that hard money loans are not signature loans. If you don’t have a property and you are going to a lender and asking him to give you loan because you have good job, credit history and income, you won’t get it.

You can’t keep yourself as a security in front of a lender. You have to have a good deal in hand and you will get hard money loans within 7-10 days if your property is really good.

You should also keep in mind that hard money loans are extremely different from title loans i.e. you can’t go to a hard money lender and ask him to keep your car as a title and give you loan. They won’t because they need a hard asset to give you a loan.

These are the basic differences between all the lenders that are working in a market. There are business lenders and real estate lenders and if you need a loan for your property, then you should go for real estate hard money loans.

You need to realize that everything here, is based upon the assets. So, you would be looking towards what those assets are and the value of those assets. The lender is going to lend based upon the asset of what you currently have.

Getting Comfortable with Hard Money Investing

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Category : Hard Money Loans , Real Estate Loans

Many real estate investors overlook hard money loans as a strategy for acquiring property. That’s because these loans are typically used by desperate property owners looking for a way out of the real estate market, rather than into it. But hard money can work for anyone, and it can be particularly useful if you’re a new investor looking to build your portfolio quickly.

Hard money loans can generally be described as high interest loans available to borrowers with any credit rating, as long as they can can provide solid collateral – usually equity in real estate, such as a home. These loans are almost never issued by banks or deposit institutions, but rather by private lenders who specialize in short term lending at high interest.
Normally a home owner in need of a big loan would apply for a second mortgage, using real estate equity as collateral, but bad credit can make things difficult here. If a home owner has missed a few mortgage payments, the banks may refuse to provide more financing – hard money might be the only option in this case.
The limit for hard money loans typically hover at about 60 to 70 per cent of a property’s quick sale value, defined as the price a lender could reasonably expect to realize if the borrower defaulted on the loan, and the property was liquidated fast. The interest rate for a hard money loan is usually in the 15 to 25 per cent range.
Investors can take out hard money loans to buy a property, as long as they provide acceptable collateral – in this case it could even be the property they’re buying. The strategy here is to find a pre-foreclosure property, or any real estate with an owner prepared to sell below below market value as long as the sale is fast. If the investor can re-sell the property at full market value, before too much interest is paid on the hard money loan, he or she can make a significant profit. Hard money loans have helped many successful investors get started in real estate.

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.

Private Hard Money Loans

Tags :

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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