Best Hard Money Lender + Fast Hard Money Loans
Hard money loans, are unlike conventional bank financing. These loans are considered, “privately funded loans,” as the requirements vary from one lender to the next. hard money lenders are concerned with one thing: the collateral, and equity protection. Rates are higher than conventional loans, but funding times are faster, and loan criteria and repayments terms can be individually tailored. hard money loans are referred to as a last resort, depending on your exact situation. Experienced investors know that if you want a property – you have to move fast. When you want to buy a property within a few days, a loan is the only way to do it. Traditional loans take time. It’s impossible to get a traditional loan approved in 3-12 days. Most traditional lenders take 1-3 months to approve you loan. Because loans are secured by real estate, they come with different guidelines. For example, credit score doesn’t matter in a hard money loan. The lender only looks at your collateral. Traditional lenders however, will never give a loan based on collateral only. In contrast, hard money lenders will. Traditional lenders care about your credit – whereas hard money lenders do not.
The funds in a loan come from private lenders who are interested in lending their money for interest. hard money lenders charge a higher than average interest rate – compared to traditional institutions. The source of the funds can come from an individual, or a pool of investors, who invest in your loan. Often, many will pool their money and work with a commercial lending asset manager, or through a broker who facilitates the loan.
As a result, this loan is used mostly by real estate investors who are interested in conducting transactions and need a source of money to leverage. Banks tend to not loan to investors, because banks want to make sure they’ll get paid back. Banks look at things like collateral, personal finances, and your credit score. hard money lenders will often look at the LTV – loan to value – ratio, when evaluating your deal. Lenders prefer a low LTV – no more than 70-80%.
Hard money lenders are useful when time is off the essence. hard money can help you capitalize on critical opportunities – with fast loans, with no credit/income verification checks. If you can’t get funding through conventional means – then consider speaking to a lender. It’s a great option for short term financing.
Typically, it can take 5-10 days to get funding for a loan. Traditional banks take anywhere from 4-8 weeks. Lenders like Delancey Street can fund faster because our loans are funded directly. That means less paperwork, and less red tape involved in funding the loan. Moreover, you can get a loan even if you have bad credit! Credit is not an issue. You should, however, have a plan on how you will repay the loan. Our funding criteria is based on equity in the property and your payment repayment plan. We make loans to foreign nationals, and entities – who have no credit. Typically, we’ll ask you for an appraisal to help us understand the loan to value ratio.
Borrowers should consider a loan, instead of a traditional lender, when you need quick access. Gaining access to this capital comes at a higher interest rate because the investor wants a higher ROI than investing it into bonds, savings account, etc. Moreover, the investor is aware a traditional lender won’t lend to you – and thus, he/she is taking on additional risk by investing in your project. Only turn to a hard money lender if you REALLY need this money.
While you can go to a traditional lender instead of a lender, in most cases if you’re looking for a loan it’s because you have a questionable financial history. Banks look for collateral, good credit, and cash flow. Moreover banks will make you go through a rigorous application process, and take time to make a decision.
Understanding money loans
Life is simpler if you can get a mortgage for your case. Unfortunately, sometimes it’s not that easy. Sometimes you need money ASAP for a real estate purchase. If you don’t qualify for a conventional mortgage, then we can help you. Loans are one of many solutions, available for unconventional borrowers. Are they right for you? If not, what’s a better option? Keep reading, and we’ll educate you on loans, and how to make an informed decision.
These loans are a type of real estate loan. They are based off the value of the collateral(the property itself), rather than your capability to repay the loan. Here are some types of loans:
- Bridge Loans. These are used to allow someone to buy property quickly, with the goal of reselling it, or refinancing it. These allow someone to buy a new property ASAP.
- Fix and Flip Loans. These types of loans allow someone to buy a rehab property, and then fi it up quickly so it can resold later.
- Owner Occupied Loans. These loans allow consumers who don’t qualify for other types of financing to get a property for themselves.
- Construction Loans. These loans allow developers to get started on new construction projects, with the intent of refinancing, or selling it quickly.
Why would a money loan be denied?
hard money lenders are considered flexible, and open minded, in contrast to traditional lenders. While it’s true that hard money loans have less stringent requirements versus traditional loans, you could still face some pushback. Lenders will look at you, and your experience, and your business plan – very closely. Here are some things that might cause a hard money lender to reject your loan request.
You aren’t putting down enough equity
Applicants who plan on buying a property, or fixing and flipping, need to realize that hard money lenders want to see you have “skin in the game.” hard money lenders will evaluate your application, and assess the chances of you succeeding. They look to see how much equity you’re putting into the project. Delancey Street looks to see how much of a down payment you’re putting down, and how much risk you’re taking. Our ideal partner has just as much risk as we do. Lenders typically look to see if the applicant has enough cash to cover the down payment on the investment property. It’s important that you be able to demonstrate that you’ll be able to complete the project – financially speaking. Keep in mind that most lenders will only approve an application where the real estate investor is taking some risk/liability on his/her shoulders as well. If you expect a lender to take a 90-100% risk then it’s likely the loan will get denied. It’s important you have enough cash to cover the down payment, and other smaller bills that might arise in the future. Be prepared to show some proof of cash, so the lender understands you have a plan and won’t abandon the project.
It’s important you demonstrate to the lender you have plan in place. Hard money lenders want to make sure they’ll get repaid. You have to show your plan, and how you’ll repay the loan in the future. When you accept a hard money loan, you’re agreeing to a loan term – which means the loan has to be repaid within that period of time. If you don’t repay it, you forfeit ownership of the property to the lenders. Many lenders will refuse to lend you if you don’t have an exit strategy. It helps if you have cash reserves, or assets, in place to help cover the balloon payment in the event your plan fails. Most lenders prefer not to seize your collateral and sell it to settle the debt. They would rather get paid, and want to make sure the real estate investor they are working with is prepared to fulfill his obligations.
Many lenders pay no attention to your credit score. However, some might look for things like bankruptcies, which signal you aren’t good with your finances.
Can hard money lenders only help distressed borrowers?
Not at all. While it is true, some borrowers are in distress when looking for hard money – in many cases it’s investors who turn to hard money.
Are there any hard money loan application fees or anything?
No. We don’t believe in application fees. We believe many lenders who charge application fees are often “middle-men,” who are simply looking to make money by charging application fees. They are not actually interested in funding your deal.
Can you transition from a hard money loan to a bank loan?
Yes, it’s 100% possible. Many real estate investors often use hard money loans to buy a property. They wait for 6-12 months, and then refinance the property with a traditional bank loan. Because you’ve bought the property, you can now “wait,” for the bank to take 2-3 months to approve your loan.
Do you lend on owner-occupied properties?
Delancey Street only provides loans for real estate investment properties. We do not lend on properties that are owner-occupied.
Money loans versus traditional bank loans
hard money and traditional loans are similar, yet very different. hard money loans are tools used for buying property. These loans are given out by private lenders. Because there is no standard set of guidelines for hard money loans, each loan has different terms. It’s common for hard money lenders to offer different terms and interest rates for the same type of investment, to different real estate investors. In contrast to traditional loans, hard money loans have short repayment periods and higher interest rates. Compared to conventional loans, they are much easier to qualify for, and to be approved for.
- hard money lenders ignore bad credit, bankruptcies, or other issues that would normally prevent you from getting a traditional mortgage.
- hard money lenders care about the value of your real estate property. hard money lenders are collateral focused, due to the nature of the loan. They care exclusively about whether the collateral can be liquidated to cover the loan amount.
- Traditional loans focus on your credit rating and capability of repaying the loan based on income.
Most hard money lenders will not give you money to purchase a primary residence, whereas traditional lenders will. Traditional lenders look at your income, expenses, and debt to income ratio in order to make sure you can repay the loan. In addition, traditional lenders have to be licensed by their state authorities. There are federal tests and licensing requirements, in addition to state tests. It’s an expensive process. In contrast, hard money lenders don’t face such requirements.
Does credit score matter for a money loan?
No. We don’t look at your credit score. We only care about the investment property. We look at the specifics of your deal, and focus our decision making process on whether or not we think the deal will “work.” Delancey Street is less concerned about your financial history, and more concerned about the deal itself. Typically, we look to see how much money the deal can realistically make – based on data – and try to understand whether or not the real estate investor has the skills to pull it off.
How can I get pre-approved for a hard money loan?
Real estate investors who have established themselves as trustworthy are eligible for our pre-approval process. We’re very transparent and straightforward, and can provide proof of funds for investors who work with us.
How do hard money loans work
hard money loans aren’t available to everyone. Typically, they can only be used for investment purposes. If you plan on using a hard money loan to buy your own home, then it’s unlikely you’ll get approved. hard money loans are typically given for a term of 6-24 months only. While it’s possible to get a hard money loan for a period of time greater than this, it’s unlikely to be cheap – or easy. Most hard money lenders will expect a balloon payment at the end of the loan for the principal and interest. Rather than making payments each month (like a traditional lender would expect), this gives you greater freedom. hard money is great if you a short term loan that is approved fast.
Most traditional lenders are ok approving 80-90% LTV loans. In contrast, hard money lenders expect you to bring some of your own money to the deal. Each hard money lender will require you to bring at least 20-30% of the overall loan amount to the table. Most lenders lend at around 50-60% LTV. Anything greater than that will generally involve greater scrutiny.
How fast can a hard money loan be approved?
At Delancey Street, we firmly believe we’re partners first. We treat you how we’d want to be treated and that means being transparent and honest with you at every step. It’s hard to say you’ll get approved in 24 hours guaranteed. It’s simply impossible to make such claims. What we can promise you is never to play games, or delaying the process. We use a very sophisticated algorithard money to evaluate potential deals, and give answers quicker than other hard money lenders. The faster you send us the info, the quicker we can evaluate and fund it. It’s common for real estate investors to get a conditional approval within 24-48 hours of us reviewing their application.
How much do hard money lenders typically charge?
Most hard money lenders charge interest rates anywhere from 7% to 12%. They may also charge origination fees which range from 1-3%. In addition, it’s not uncommon for hard money lenders to charge pre-payment penalties. The purpose of these penalties is to guarantee the hard money lender a specific profit on their loan.
What are the benefits of hard money loans
hard money loans have numerous benefits. The biggest is that borrowers can get money without going through the hurdles traditional lenders have. hard money loans come from private lenders, and thus, there are many guidelines. hard money is good for emergency funding situations, because lenders care only about the value of the collateral. Traditional lenders focus on your ability to repay the loan. This is huge, because it changes how the deal is evaluated. Once you’ve got a good relationship with your lender – it’s likely your future loans can be approved within literally hours. Needless to say, loans are great for people who need bridge funding in timely manner.
hard money loans are extremely flexible compared to traditional loans. Lenders do not subject you to rigid guidelines, unlike traditional banks. hard money lenders are giving you money because they’ve assessed your collateral and have decided the value of the property justifies the loan amount.
What are your fees for hard loans?
Every single loan is different. It’s hard to give a cookie cutter answer on what the fees will be. As a lender, we charge between 8-12% interest. In some cases, we charge points upfront. The fees we charge are based entirely on the risk of the loan, and the length of the loan. If a loan is risky, we charge a fee commensurate to the risk. Bottom line, we are transparent and always fair. We never want to overcharge, and we always focus on offering our clients every opportunity possible to show us ways the risk is less on the loan.
What does Delancey Street do besides hard loans?
Delancey Street’s primary focus is providing financial solutions. We engineer creative financing methodologies to help entrepreneurs achieve their goals. For example, we offer loans against Bitcoins – where the coins are used as collateral for fiat currency loans. In addition, we conduct transactions like reverse mergers – where we help take companies public. These additional services are part of our core philosophy of handling complex transactions, and coming up with cohesive strategies that accomplish the goals of the entrepreneur.
What kind of property do hard lenders lend on?
hard money lenders will lend on both residential and commercial property. Many will NOT lend on owner-occupied residences, due to the laws and restrictions. Examples of commercial properties include, but are not limited to: industrial buildings, shopping centers, office buildings, offices of all sorts, etc. Some hard money lenders may even invest in raw land, which is slated for development. Vacation homes, are considered owner occupied, and thus may not be financeable by hard money loans.
Is a hard loan right for me?
There’s a number of benefits when it comes to hard money loans. Bottom line, hard money loans provide investors with a quick, and fast, way of getting funding for their next project.
- hard money is quick money. Instead of spending 2-3 months getting a loan, you can get a hard money loan approved in literally days.
- hard money lenders are lenient, compared to traditional lenders that have stringent standards. Most hard money lenders focus on the collateral, not your ability to repay the loan. As a result, they are able to be creative when it comes to tailoring a loan for you.
- Flexible terms is one of the reasons many people turn to hard money lenders. You are working with a private lender, not a massive bank – which means you can get a loan that is right for you. It means you can get a tailor made loan, unique to your situation.
- Increased opportunities come from hard money loans. By being able to close a deal within 5-10 days thanks to fast cash provided by hard money, you’re able to secure deals fast.
How do Delancey Street hard money loans work?
Delancey Street provides hard money loans nationwide. Sometimes you need funding for a new deal ASAP. When that happens, Delancey Street is here to help you. We provide hard money loans for a wide array of properties, ranging from commercial properties to residential properties. We handle all LTV’s, up to 90%, and in some cases are ok with even 100% LTV financing. The main thing our team cares about, when evaluating hard money deals, is whether or not we think the project will succeed. At the end of the day, a hard money loan is collateralized by real estate. We base our evaluation based on the present value of the real estate, and what we think you’ll be able to do with the real estate property. Our goal (and yours), is to transform that property so that everyone makes money. We can work with you on a variety of loans, like:
- Bridge loans, to help to bridge a funding gap you’re facing in a new property purchase, or a fix and flip which is going over-budget.
- Fix and flip loan, which allows you to buy a property and rehab it, and then flip it at a profit.
- Property refinance, to help you pull cash out of equity you’ve got in a property.
- Construction loan, to help developers get started on a new construction project with the intent of refinancing it later, or selling it at a profit.
When to consider getting a hard money loan
Hard money loans are used as investment tools by investors. They are useful in a few situations, such as:
- Unable to get financing elsewhere. Funding real estate investments is tricky. Traditional mortgages are difficult to get under normal situations. Banks are very cautious of making loans for investments, as opposed to loans for residences. As a result, if you’re looking for investment funds – then get a hard money loan.
- You have a poor credit history. Hard money loans are based off the collateral of the investment, not your ability to repay. Loans made to consumers – as opposed to lenders – are based off your ability to repay the loan. This means if you have a poor credit history, or no stable income – then you might not get approved for a loan.
- You need money. Hard money loans are great so you can get money ASAP. Traditional loans take time. Hard money is very fast. If you need to capitalize on an opportunity immediately, then you can get a hard money loan. If you can wait several weeks, then it’s better to get a hard money loan.
Why Do Hard Money Lenders Exist?
Hard money lenders server a very specific group of people, i.e. real estate investors. Hard money lending is a form of short term lending, which is secured by real estate. Specifically, the people who use hard money loans are typically real estate investors – typically, those who are being denied a traditional loan due to stringent guidelines.
Hard money lenders exist because they are fast, and offer loans with little to no headaches. Hard money lenders have a streamlined application system. They expect collateral, and don’t look at your credit score. They focus on your experience, rather than your credit worthiness. If you have a checkered financial past, it’ll be easier to obtain financing by using a hard money loan rather than a conventional loan which is granted based on your credit report. Below are situations where hard money lenders fill a void that traditional lenders don’t touch:
Fix and Flip Loans
Most traditional lenders will not give you a loan for a fix and flip project. If the house is in poor condition, or there’s some other abnormality with the house, then a traditional lender will not give you funding. In addition, most fix and flip potential deals “go fast.” The seller is very motivated to sell the property, and will accept the first offer. Traditional lenders take forever, so by the time the loan is approved – you’ve already lost the property since someone paid cash for it. If you have a hard money lenderon your side who can close a loan in 5-10 days, you can get the fix and flip property.
People With Bad Credit
Most traditional lenders look at a borrower’s credit report. They verify your income, and investigate past delinquencies. It means that someone with a checked credit history will have a difficult time, and in some cases never get approved. When this happens, your only option is to work with a hard money lender. While the interest rates for a hard money loan are higher than traditional loans – if the deal makes sense, it might make sense to take the money.
Sometimes, your project goes over-budget and as a result you need additional funding. Some traditional lenders will refuse, because the project isn’t completed. While this can be devastating, a hard money lender might be willing to lend you the funds. Hard money lenders are happy to give money to bridge the gap in funding, and can work with you to fill that void.