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Concord-California Hard Money Loans
If you’re in the market for a real estate loan, then you probably know that not everyone is eligible for the same type of loan. When it comes to conventional mortgages, some people are unable to qualify and end up needing an alternative. Hard money loans are for real estate purposes and often serve as a valuable tool for real estate investors. The information below sheds light on this type of loan.
About Hard Money Loans
Hard money loans are unlike traditional bank loans and hard money lenders make decisions to fund these loans using different criteria. For starters, while banks focus on your ability to repay the loan, hard money lenders are more concerned about your collateral. They make funding decisions on an individual basis without having to follow a template or checklist of requirements. There are different kinds of hard money loans, such as the bridge loan, fix-and-flip loan, owner-occupied loan and construction loan.
The bridge loan is a good option if you plan to purchase a property as soon as possible and then resell or refinance it. In addition, this loan type allows you to buy a property before you have the cash down payment from selling a property you already own. As the name implies, a fix-and-flip loan let’s you fix a rehab property in a short amount of time, sell it, and then pay the loan off. An owner-occupied loan is for consumers who are purchasing a home they plan to live in, but cannot qualify for traditional funding. Real estate developers use the construction loan to start a new construction project that they plan to refinance and sell immediately.
If you are looking for a consumer loan for a private property, you should know that many hard money lenders don’t provide this type of loan because they can be a regulatory nightmare. Owner-occupied consumer loans require compliance with Dodd-Frank, licensing requirements and other laws, which can complicate an otherwise simplified application process.
How Hard Money Loans Work
You might find it interesting to know that hard money loans are usually for a term of about 12 months, though it could be a couple of years. Generally, you will only be required to make monthly interest-only payments instead of equal principal and interest payments. In fact, there are some loans that don’t require you to many any payments at all. The application process for hard money loans is fast and often takes less than a week.
There’s a good chance that you will need cash for a hard money loan. The amount will depend on the After-Repair-Value (ARV) ratio or Loan-To-Value (LTV) ratio. When the term ends, you will pay the loan off in a balloon payment that includes the principal, remaining interest and fees.
How Hard Money Loans Are Different
When you get to the root of hard money loans, you’ll find that they are a lot different than bank loans. While there are some underwriting similarities, and both offer loans for the purchase of real estate, that’s about all they have in common. Hard money loans have a very short repayment period, the interest rates are high, they can sometimes have hidden fees, there is a lack of governmental oversight and refinancing can be difficult.
On the flip side, there are advantages that some people believe outweigh the disadvantages. For instance, you can get access to the money that you need quickly and the process is easy. Further, the requirements are lenient, so if you have a poor credit score, there’s still a chance that you will qualify. They also have flexible terms and lenders are more likely to offer a custom loan product. If you’re a real estate investor, you might find the advantages of a hard money loan compelling