What makes a hard money lender different from a conventional lender
The main difference between banks and hard money lenders is that hard money lenders are asset centric lenders. They focus on the asset associated with the funding request. But, traditional lenders hone in on the borrowers credit and liquidity. It is very important to remember hard money loans are not good for the long run. The objective of a hard money loan is to be a bridge loan that which helps you get the real estate you are attempting to buy. Hard money lenders focus on short term loans that reap a great ROI. If you are unable to pay the hard money lender back, a hard money lender can repossess your property to be able to settle his/her loan.
When should you think about getting a hard money
Hard money loans serve as funding tools by investors. Here are some examples where hard money is good, such as:
Not able to find financing elsewhere. Funding real estate investments is complicated. Traditional mortgages are difficult to get under normal situations. Banks are extremely careful of extending a loan for real estate investments, as opposed to loans for primary residences. As a result, if you’re looking for investment funds – then you’ll probably have to get a hard money loan.
You have a bad credit . Hard money loans are based off the collateral of the investment, not your ability to repay. Loans made to consumers – as opposed to private money lenders – are based off your ability to repay the loan. This means in case you have a bad credit history or no steady income – then you may not get approved for financing. You need capital. Hard money loans are great so you can get money ASAP. Traditional loans take time. Hard money is very fast. If you will need to capitalize on a chance immediately, then it is possible to get a hard money loan. If you can wait several weeks, then it’s better to find a hard money loan.
Hard money lenders can help finance your next loan
Hard money lenders work a very specific group of people, i.e. property investors. Hard money lending is a form of bridge term lending, which is secured by property. Specifically, the men and women who use hard money loans are generally real estate investors – typically, those who are being denied a traditional loan as a result of stringent guidelines.
Hard money lenders exist since they’re fast, and offer loans with little to no headaches. Hard money lenders have a fast application system. They anticipate collateral and don’t look at your credit score. They concentrate on your experience, rather than your credit score. In case you have a checkered financial past, it will be much easier to obtain financing by using a hard money loan as opposed to a conventional loan that’s granted based on your credit report. Below are scenarios where hard money lenders fill a void that conventional lenders do not touch:
Annapolis Hard money loans can be used for repair and flip real estate investors
Most traditional lenders will not offer you a loan to get a fix and flip project. If the home is in poor condition, or there’s some other abnormality with the home, then a traditional lender won’t give you funding. In addition, most fix and flip potential deals”go quickly.” The seller is extremely motivated to sell the property, and will accept the first deal. Traditional lenders take forever, so by the time the loan is approved – you have already lost the property since someone paid money for it. If you have a hard money lender on your side who will close a loan in 5-10 days, you can get the fix and flip property.
Hard money loans are bridge loans
From time to time, your job goes over-budget and as a result you need additional funds. Some traditional lenders will deny, because the project isn’t completed. Though this can be devastating, a hard money lender might be willing to lend you the money. Hard money lenders are happy to give money to bridge the gap in financing, and can work with you to fill this void.
Hard money gives you leverage
If you are a real estate investor, more funding means more deals. By using outside hard money, you can work on more simultaneous deals that would otherwise not be possible. Conventional lenders look at your entire debt to income ratio, and will not give you funding if they think you owe too much money. In contrast, a hard money lender does not care about your income, nor do they care about your present debt. The only thing a hard money lender will fixate on is the value of your property. Hard money loans are excellent for developers who need funds to get their project started but are not a fantastic fit for traditional lenders. Remember, traditional lenders are not interested in taking on extra risks – they legally aren’t allowed to after the 2008 crash. Hard money loans typically finalize faster than conventional loans from a bank, which permits you to move faster. Many sellers will be extremely reasonable on their price and ready to cut you some slack – if you can show proof of funds. Many real estate investors that rely on conventional lenders cannot move fast because of delays due to the strict guidelines conventional lenders have. Speed and unlimited money, is why hard money is great.