Each year in the United States, hundreds of billions of dollars pass through the hands of buyers and sellers of real estate. The majority of these transactions rely on some form of financing to get the deal closed. For most Americans looking to purchase a home, the preferred source of financing is a traditional mortgage.
Mortgages have been around for as long as America has existed. Over that time period, lenders, usually large corporate banks, have perfected the underwriting process. Modern mortgages allow homeowners to significantly leverage their capital while paying relatively low rates. These financial vehicles allow home buyers to get into real estate that would otherwise take them decades of saving to be able to afford.
But in order to keep costs low, mortgage lenders tend to be very strict as to who qualified for a traditional mortgage. The downside of these lending standards is that many people do not qualify for a traditional mortgage. For the majority of potential home buyers, having a mortgage application denied is a good indication that credit should be improved and income should be stabilized and probably increased.
However, some potential buyers may be unable to obtain a mortgage for other reasons. Mortgage lenders often stay away from certain transactions. This include homes that have serious defects that materially affect the marketability of the property, as well as situations where a buyer is involved in more than one real estate deal simultaneously. In these situations, real estate investors who know their markets may want to turn to hard money lenders as an alternative to traditional mortgage financing.
What is a hard money loan?
Albany hard money loans are a form of short-term financing that is usually issued by individual investors or groups of local investors. Unlike mortgages, they usually have few or even no lending criteria, making them flexible and giving savvy real estate investors wide latitude to structure deals.
Albany Hard money loans often have considerably higher interest rates than mortgages, but they also can have vastly reduced up-front costs. For investors who are looking to maximally leverage their capital, hard money loans can be a powerful tool.
For example, a $100,000 real estate purchase using a traditional mortgage may require the buyer to come up with as much as $30,000 or more out of pocket. The same purchase using a hard money loan will typically not require more than $5,000 in cash outlays. In many cases, investors who have long-established relationships with hard money lenders may be able to structure deals in a way that does not require any out-of-pocket expenses on the part of the borrower. These deals are known as zero-down purchases, and they can almost never be carried out using traditional mortgages. But savvy investors who know how to play their local market can often work out such deals, and these can be a huge edge for market-wise fix-and-flippers.
Hard money is fast money
Another huge advantage of hard money loans in Albany is that when it comes to closing timeframes, they can often be as good as cash. In hot real estate markets, where the average selling time for new listings may be measured in weeks or even days, speed of closing becomes a primary concern for both buyers and sellers. Because mortgage approvals can easily take three months or longer, sellers become hesitant to deal with buyers using mortgage financing if cash purchasers are interested in the property.
But with hard money loans, it is often possible for investors to get the purchase amount transferred to the seller within a few days, making closing timeframes similar to those of cash purchasers. This increased speed can give investors using hard money a decisive edge in kinetic markets, allowing them to close on the best deals while those using mortgage financing are left in the dust.
Delancey Street is here to help
Delancey Street is a premier Albany hard money lender. We have over $200 million in funding available for potential projects. We We look forward to hearing about your project, and how we may be able to help. Regardless of the size of your hard money loan, we encourage you to reach out to us in order to learn more. We take on deals that other lenders say no to – because we look at the big picture.