Buffalo Hard Money Lenders
With the real estate and housing market picking up in Buffalo, many people are using this time to purchase homes and real estate property. Many are Buffalo real estate investors looking to purchase new properties in order to build their real estate portfolio. Many of the borrowers find that hard money loans are their best option. Just what is a hard money loan and where can a borrow get one? Read on and get the facts.
What is a Buffalo Hard Money Loan?
A hard money loan is a loan used to purchase property in a hurry. Unlike conventional mortgage loans, or soft money loans, that have terms from 10 to 30 years, Buffalo hard money loans are for shorter terms. Hard money loans are usually for one year, although they may go up to 36 months.
Hard money loans are typically used by individuals who are purchasing property and need money in a hurry. With a conventional mortgage loan, it can take weeks for the loan to close. Hard money loans can be completed in as quickly as a day or two. The main reason hard money loans can be obtained so quickly is because they do not have the same rigid requirements as soft money loans.
To be eligible for a soft money or conventional loan, the borrower would have to meet certain credit, income and employment requirements. Hard money loans, on the other hand, are based on the value of the property and the borrower’s equity. In most cases, the borrower’s credit history and income have no bearing on the approval process whatsoever.
Benefits of a Buffalo Hard Money Loan?
Hard money loans come with many benefits.
• Fast Approval – Because the lender or investor doesn’t have the same strict requirements, the approval process is much quicker with hard money loans. The hard money lenders evaluate a potential borrower’s creditworthiness differently than a conventional bank, so the loan gets approved much quicker. Overall, the hard money lender isn’t focused on your credit. The lender is focused on your ability to repay the loan based on your projects chance of succeeding.
• More Flexible – Because you’re dealing with an investor or a group of investors, the loan terms are not going to be quite as “carved in stone” as with conventional loans. Investors are more likely to be willing to negotiate a payment plan that works for both of you.
• Credit Not a Problem – With conventional mortgage loans, your credit history is probably the most important factor used to determine if you’re approved for the loan. Hard money loans are based on the property’s value, so credit scores aren’t that important. This is also a reason why hard money loans are good for new borrowers who may have bad or limited credit and might not get approval from conventional lenders. Buffalo hard money lenders look at the value of the property, and then compare that with the amount of money requested (known as LTV). If the loan requested is less than the value of the property – it’s more likely your loan will get approved. Most Buffalo hard money lenders offer hard money loans with a maximum 70-80% LTV.
Disadvantages of Hard Money Loan
As beneficial as they can be, hard money loans also have some disadvantages.
• Higher Interest Rates – Hard money loans have interest rates substantially higher than conventional mortgage loans. They may be as high as 15 percent to 20 percent. Their loan fees are generally higher as well.
• Shorter Loan Terms – The terms of hard money loans are usually one to three years, unlike conventional loans that may go up to 30 years.
• Possible Loss of Property – Because hard money loans are based on the value of the property, and the property is the collateral, you can lose the property if you fail to meet the terms of the loan.
• May Be Difficult to Refinance – Some conventional banks require you to own property for a certain length of time before they’ll refinance it. If you’re not able to pay off the hard money loan and need to refinance it through a conventional lender, it could be a problem.
Where Can I Get a Buffalo Hard Money Loan?
The fact that hard money loans come from investors or investment firms rather than banks does not mean that hard money lenders are difficult to find. Delancey Street is a premier hard money lender that offers loans for properties in Buffalo. Regardless of whether it’s a commercial or residential property we can help. In order to get started we recommend you start getting your paperwork in order. Provide us with an appraisal, and other data about your project such as the loan amount you want, in addition to how you’re going to be using the funds.
How can you use the loan?
We fund all types of projects ranging from residential to commercial. For example, we fund fix and flip projects, in addition to providing refinancing on existing properties. Many real estate investors turn to us when they need cash out refinancing on an existing residential or commercial property with a 70-80% LTV. Bottom line, you can use the proceeds how you wish – as long as the funds are eventually repaid based on the proposed term. In the event the loan is not repaid, you have to aware of the fact the property is collateral – and will be forfeit.
What distinguishes Buffalo hard money lenders from regular lenders?
The critical difference between banks and hard money lenders is the fact hard money lenders are asset based lenders. They look at on the collateral associated with the by the person asking for the loan. In contrast, traditional lenders focus on the borrowers credit and how much money the potential borrower has. It’s very important to remember hard money loans are not good for the long term. The objective of a hard money loan is to be a bridge loan that gets you the investment property you are trying to buy. Hard money lenders focus on short term loans that get them high profits. If you fail to repay the loan, then the company you borrowed from can take possession of your property to be able to settle his/her loan.
Why is hard money a potentially terrible idea
There’s some really important reasons reasons why a hard money loan is a bad idea. For instance, hard money lenders often charge higher interest rates. This is due to the fact hard money companies think they’re taking substantial risks by lending on an investment property – and want to be reimbursed accordingly. High interest rates make hard money loans economically toxic for some types of deals. Moreover, hard money lenders have shorter terms than traditional lenders – that also makes them unattractive. Institutional lender offer 30 year periods but hard money lenders offer only 1-3 year loan terms.
Hard money lenders can finance your deals fast
Hard money lenders assist a very specific group of people, i.e. property investors. Hard money lending is a type of short term lending, which is secured by real estate. Specifically, the people who use hard money loans are generally property investors – typically, people 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 expect collateral and do not look at your credit score. They concentrate on your expertise, as opposed to your credit score. In case you’ve got a bad financial past, it will be easier to obtain financing by using a hard money loan rather than a conventional loan that’s granted based on your credit report. Below are situations where hard money lenders fill a void that conventional lenders do not touch:
Buffalo Hard money loans can be used for repair and flip real estate investors
Most traditional lenders will not give you a loan to get a fix and flip job. If the home is in poor condition, or there is some other abnormality with the house, then a conventional lender won’t 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 deal. Traditional lenders take forever, so by the time the loan is approved – you’ve already lost the property since someone paid money for it. If you have a hard money lender on your side who can close a loan in 5-10 days, you can get the fix and flip property.
Hard money loans are great for bridge funding
From time to time, your project goes over-budget and because of this you require additional funding. Some traditional lenders will deny, because the job isn’t finished. While this can be catastrophic, a hard money lender may be willing to lend you the money. Hard money lenders are delighted to provide money to bridge the gap in financing, and can work with you to fill this void.
Hard money gives you leverage
If you’re a real estate agent, more funding means more deals. By using outside money, you can focus on more simultaneous deals that would otherwise not be possible. Conventional lenders consider your overall debt to income ratio, and will not give you a loan 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 one 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 aren’t a fantastic fit for conventional lenders. Keep in mind, traditional lenders aren’t interested in taking on additional risks – they legally are not allowed to following the 2008 crash. Hard money loans are finalized faster than traditional loans from a financial institution, which allows you to move quicker. Many property owners will be willing to work on their cost and willing to cut you some slack – if you can show you have funds available. Many property investors that rely on conventional lenders are unable to move fast due to delays due to the strict guidelines conventional lenders have. Speed and unlimited money, is why hard money is great.