A San Diego Hard money loan is a form of borrowing that bypasses the conventional arrangements of a loan. Conventional loans are mainly based on the borrower’s credit score in addition to other factors. Hard money loans are based on the value of the pledged asset. Since the property serves as collateral, most of the times the loans have a low loan-to-value ratio compared to conventional loans.
San Diego Hard money loans are mostly useful in situations where the borrower has limited choices. Because banks and traditional financial institutions follow a certain process that includes validation and checking of credit scores, most borrowers in dire situations cannot be granted loans in time.
Since San Diego hard money lenders use a borrower’s property as collateral, these loans are mostly suitable for borrowers who cannot access loans elsewhere. Due to the risky nature of the loan facilities, they are only offered by a handful of investors and individuals.
The terms of these loans are not as sweet as the terms of a conventional loan. This is attributable to the risky nature of the loans. Borrowers, therefore, are subjected to interest rates that are higher than the market interest rates. Hard loans are also common in areas where banks and other institutions cannot come through in time.
To approve a loan, financial institutions have to confirm the ability of the borrower to repay back the loan. They look at the borrower’s income, his or her credit score, and obligations, among many other factors. If you have a history repaying loans in a timely manner, your chances of approval will be high.
Even with good scores and a great flow of income, borrowers might still be tagged for small faults that may appear in their reviews. The application processes are also slow and tedious because they involve the verification of details and crosschecking among different agencies. Even with all the time spent, borrowers are not guaranteed of an approval.
San Diego Hard money lenders, on the other hand, view the loans from a different angle. They are more concerned about the value of the collateral and are less interested on the borrower’s ability to repay the loan.
If the borrower is not able to repay a hard money loan, the lender can take possession of the property and sell it to get their money back. Hard money loans are also short term because of the high interest and the levels of risks involved.
The following are some of the advantages San Diego hard money borrowers enjoy
• Flexibility: Conventional loans are not flexible because they are guided by strict policies and procedures set by the law and the financial institutions involved. Lenders of hard loans, on the contrary, are quite flexible because their loans depend on the terms the involved parties agree on. Depending on the situation, the parties can discus to change the terms or certain aspects such as repayment periods and structure.
• Speed: Because the lenders are less interested on the financial history of the borrower, all the time spent by traditional financial institutions verifying ability of the borrower to repay is saved. The lender is only interested in the value of the collateral, implying that the process moves fast. This is advantageous to the borrower because he/she can access the finances within a short time and get on with his/her project. This could be significant if the borrower needs to close a hot deal. This is mostly applicable in fast deals such as hot markets and trend based businesses.
• Approval rate: The most important piece of the puzzle in a hard money deal is the collateral. The lender is interested in verifying the value of the asset and is less concerned about the other things. If the collateral is genuine, a borrower is almost guaranteed of an approval.
Having looked at the advantages of such loans, it is also important to look at the drawbacks posed by these products. They include:
• Cost: This is the biggest drawback associated with hard money. The cost of the loan is usually higher than that incurred when one is applying for a conventional loan from a financial institution. The high cost comes in form of high interest rates mainly attributable to the risky nature of the loan. The cost might also blow the roof if the borrower ends up losing his or her property to the lender. This is attributable to the fact that most lenders are mean when it comes to valuation of property, since they don’t depend on the conventional methods of valuing a property. They mostly value property based on the price that they can comfortably sell it for.
• It is a short term loan: Because there are few assurances, lenders prefer to keep the agreement short so that they can minimize their exposure to risks. Borrowers seeking long term loans are usually turned down.
Finding great financing is extremely important in real estate investing. Whether it’s your first deal or you have been doing deals for many years, finding reliable source of funding is crucial for your success.
There are many ways to finance an investment property but you need to find what works best for your situation. If you know where to get access to fast funding for real estate properties, you can close deals quickly and achieve the success you desire.
About Hard Money Loans
Hard money loans are often used as a financing option for real estate professionals. These are loans from private individuals and companies that have money to lend.
Hard money loans are asset-based loans, meaning that the loans are secured by assets or collateral. These loans are riskier in nature than loans from traditional lending institutions, and thus incur higher interest rates.
Why Real Estate Investors Use Hard Money Loans
Hard money loans are perfect for short-term financing for real estate properties. Despite the high-interest rates, real estate investors seek hard money loan when they want to fund a purchase.
Minimal Paperwork Involved – Financial institutions such as banks are often very stringent when it comes to loan processing and approvals. They demand mounds of paperwork and information, including things like personal credit history and credit score, personal information including income and work experience, business licenses, financial projections, cash flow statements, and balance sheets to name a few. These requirements often turn off many real estate investors who are looking to take advantage of fast-moving deals.
Fast Approval And Funding – Often used for fix and flip projects, a hard money loan is easy to get and offers more flexibility than traditional bank loans. Banks and other traditional lenders do not like to fund projects involving damaged or vandalized properties.
A hard money loan is usually easy to apply for and is given quickly. The process usually takes a few days to complete. Another advantage is that hard money lenders do not require borrowers to provide them with a financial history before providing the loan.
So, for the sake of convenience and speed, some investors decide to pay a much higher interest rate to secure the funding they need.
Hard Money Lenders
Hard money lenders can decide who they will work with based on their criteria. They focus primarily on the asset or property you are using as collateral. These lenders don’t want to lose money, so usually review the project to be sure you have a viable idea.
Many reputable hard money lenders are well versed in real estate investing and will advise you and provide proper guidance to help ensure the success of your project. If there is any issue that need to be resolved or address, these hard money lenders can actually detect them and help you handle the situation appropriately.
Hard money lenders want to make more money and are not going to ignore anything that could potentially ruin the deal.
Get Access To Reliable Hard Money Lenders
Take the stress out of funding investment properties by getting reliable assistance from our team of professionals. For many years, we have been providing top notch services to real estate investors and we want to help you.
We work with reputable hard money lenders, consisting of experienced lenders that are willing to provide loans that banks and other traditional lending institutions are often not able to provide due to strict lending guidelines.
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With proper guidance and quality resources we provide, you’ll be able to run a successful real estate investing business and reach your goal of financial independence. Contact us right away to learn more about our services and you can benefit by working with us.