What distinguishes Arlington hard money lenders from traditional lenders?
The most important difference between traditional lenders and hard money lenders is that hard money lenders are asset based lenders. They look at on the asset associated with the by the person requesting the funds. But, traditional lenders are fixated on your credit and how much money the potential borrower has. It is very important to remember hard money loans are not great for the long term. The objective of a hard money loan is to be a short term loan that gets you the home you’re attempting to acquisition. Hard money lenders focus on short term loans that generate a significant ROI. If you are unable to repay the loan, then the company you borrowed from can repossess your property in order to settle his/her loan.
When’s a good time 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:
Not able to find financing elsewhere. Funding real estate investments is complex. Traditional mortgages are difficult to get under normal situations. Banks are extremely cautious of extending a loan for investments, as opposed to loans for residences. Because of this, if you’re looking for investment capital – then get a hard money loan.
You’ve got a poor credit history. Hard money loans are based off the collateral of the investment, not your ability to repay. Loans made to customers – as opposed to hard money lenders – revolve around how likely it is you will repay the loan. This means in case you have a poor credit history or no steady income – then you might not get approved for financing. You need money. Hard money loans are great so you can get money ASAP. Traditional loans take time. Hard money is extremely 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 is better to get a hard money loan.
Hard money lenders can finance your deals fast
Hard money lenders work a very specific group of people, i.e. real estate investors. Hard money lending is a form of bridge 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 as a result of stringent guidelines.
Hard money lenders exist since they’re fast, and provide loans with little to no headaches. Hard money lenders have a relatively simple application system. They expect collateral and don’t look at your credit rating. They concentrate on your expertise, rather than your credit worthiness. If you’ve got a checkered financial history, it’ll be easier to obtain financing with a hard money loan rather than a conventional loan which is granted based on your credit report. Below are scenarios where hard money lenders fill a void that traditional lenders don’t touch:
Arlington Hard money loans can be used for fix and flip property investors
Most traditional lenders won’t give you a loan to get a fix and flip project. If the home is in bad condition, or there’s some other abnormality with the home, then a traditional lender won’t give you funding. Additionally, most reverse and fix 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 because someone paid money for it. For those who have a hard money lender on your side who will close a loan in 5-10 days, you can find the fix and flip property.
Hard money loans a type of bridge financing
From time to time, your project goes over-budget and because of this you require additional funds. Some traditional lenders will refuse, because the project isn’t completed. While this can be devastating, a hard money lender may be willing to lend you the funds. Hard money lenders are delighted to provide money to bridge the gap in funding, and can work with you to fill that void.
Hard money gives you bargaining power
If you’re a real estate investor, more funding means more deals. By using outside hard money, you can work on more simultaneous deals that would otherwise be impossible. Conventional lenders consider your entire debt to income ratio, and will not give you funding if they think you have a lot of existing debt. 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 care about 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 good fit for conventional lenders. Keep in mind, traditional lenders are not interested in taking on additional risks – they legally aren’t allowed to following the 2008 crash. Hard money loans typically finalize faster than traditional loans from a bank, which allows you to move faster. Many sellers will be extremely reasonable on their price and ready to cut you some slack – if you can show you have funds available. Many real estate investors that rely on conventional lenders are unable to move fast due to delays because of the strict guidelines conventional lenders have. Speed and unlimited money, is why hard money is great.