The common person has likely heard of traditional ways of borrowing money to purchase a house. They know what it is like to contact a bank or credit union to receive their money. However, they may not fully know about the other methods that plenty of people take these days to get the funding they require for a loan for real estate investing. They do not necessarily know about hard money lending.
A Different Kind Of Lending
Don’t fall into the trap of believing that you are really only able to borrow money from a particular type of lender. You do not have to rely on the banks if you do not want to. There are now other choices available to you for obtaining money for real estate. In fact, if you know the right people, the process can be a whole lot easier than you may have ever imagined.
Hard money loans are a type of loan that more investors than ever are relying on. What they get out of this type of borrowing that they do not necessarily find elsewhere is a speed of access to their money that they do not get when they go with a bank or credit union.
The hard money loan is given by an individual in most cases. They can lend out the money without having to go through the same procedures as a bank has to go through. So many of the regulations do not apply when we are talking about an individual lending the money rather than an institution.
Making A Quick Decision On Real Estate
Your purpose for buying real estate matters greatly in terms of how quickly you should worry about getting the money you need for the property. If you plan on living in property yourself, then you might want to take a longer period of time pondering your various options. If you plan to flip the property to another buyer in the not so distant future, then you are perfectly within your rights to try to get the funds you need for the property right away.
Hard money loans make it possible to get your hands on your investment faster than you otherwise would have. Since you can expect that the most desirable properties are not going to remain on the market all that long, you will want to act with speed to get the ones that are really a hot deal.
Using The Property As Collateral
Collateral is part of the name of the game when it comes to a hard money loan. It is allowed to use the property you indeed to buy as collateral on the loan that you want to borrow. This is different from how banks look at things. They care more about your credit history and score. They don’t really factor in that the thing you are buying may have value in itself that they could use to limit their risks on lending you the money. When they look at things like that, it makes a lot more sense that they would perhaps lend you the money.
A lender of hard money can make an assessment on your ability to repay the loan in part based on the collateral of the property itself. Doing this allows them greatly flexibility when dealing with you directly. They will just want to make sure that you do not borrow more than you can afford to pay back when also factoring in the value to loan ratio. Most hard money lenders will want to see a property that has at least seventy percent of the value of the loan that is being borrowed.
Consider those ratios when determining how much to ask for on a loan. You might discover that hard money lenders are more than happy to work with you when you are reasonable with your requests like this.