What differentiates Wisconsin hard money lenders from normal lenders?
The main difference between traditional lenders and hard money lenders is that hard money lenders are asset based lenders. They entirely revolve their decision based on on the asset associated with the by the potential borrower. But, traditional lenders hone in on credit and cash flow. It is very important to remember hard money loans aren’t great for the long run. The purpose of a hard money loan is to be a short term loan that gets you the real estate you are attempting to purchase. Hard money lenders focus on short term loans that reap greater ROI than leaving the money in the bank. If you are unable to repay the loan you took, then the company you borrowed from can repossess your property to be able to settle his/her loan.
Why should you not you get a hard money loan?
There’s some really important reasons reasons why a hard money loan is a bad idea. For example, hard money lenders look for higher interest rates. This is due to the fact hard money companies think they are taking huge risks by lending on an investment property – and wish to be compensated according to the level of risk. High interest rates make hard money loans unattractive for some kinds of deals. In addition, hard money lenders have shorter loan terms than conventional lenders – which also makes them unattractive. Institutional lender offer 30 year periods but hard money lenders offer only 1-3 year 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 property. Specifically, the people 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 focus on your experience, rather than your credit worthiness. If you have a bad 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 situations where hard money lenders fill a void that conventional lenders don’t touch:
Wisconsin Hard money loans can be used for repair and flip property investors
Most traditional lenders won’t offer you a loan to get a fix and flip job. If the house is in poor condition, or there’s some other abnormality with the house, then a conventional lender won’t give you funding. In addition, most reverse and fix potential deals”go quickly.” 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 have already lost the property because someone paid cash for it. If you have a hard money lender on your side who can close a loan in 5-10 days, you can find the fix and flip property.
Loans from private money lenders are great for people who don’t have great credit
Most traditional lenders look at a potential borrowers credit report. They look at your income and investigate past delinquencies. It means that somebody with a credit history will have a difficult time, and in some instances never get approved. If this happens, your only option is to work with a private money lender. While the rates of interest for a private loan are higher than traditional loans – if the deal makes sense, it might make sense to take the money.
Hard money gives you bargaining power
If you are a real estate investor, more funds means more deals. By using outside money, you can get involved in more simultaneous deals that would otherwise be impossible. Traditional lenders consider your entire debt to income ratio, and won’t give you a loan if they believe you owe too much money. In contrast, a hard money lender does not care about your income, nor do they care about your existing debt. The only thing a hard money lender will care about is the value of your asset. Hard money loans are excellent for developers who need funds to get their project started but are not a good fit for conventional lenders. Remember, traditional lenders are not interested in taking on additional risks – they legally aren’t allowed to following the 2008 crash. Hard money loans are finalized faster than traditional loans from a bank, which allows you to move faster. Many property owners will be willing to work on their price and ready to cut you some slack – if you can show you have funding approved. Many real estate investors that rely on conventional lenders are unable to move fast because of delays due to the cumbersome guidelines traditional lenders have. Speed and unlimited money, is why hard money is good.