What distinguishes Kentucky hard money lenders from traditional lenders?
The critical difference between banks and hard money lenders is that hard money lenders are asset centric lenders. They focus on the collateral associated with the by the person asking for the loan. In contrast, traditional lenders hone in on credit and how much money the potential borrower has. It is 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 property you’re trying to buy. Hard money lenders focus on short term loans that reap greater ROI than leaving the money in the bank. If you fail to repay the hard money loan, then the hard money lender can take over your property in order to settle his/her loan.
When should you get a Kentucky hard money loan
Private money loans are used as funding tools by investors. They are useful in a few situations, such as:
Unable to get financing elsewhere. Funding real estate investments is complicated. Traditional mortgages are tough to get under normal situations. Banks are extremely cautious of extending a loan for purposes of real estate investments, instead of loans for residences. Because of this, if you’re looking for investment capital – then you’ll probably have to get a loan from a hard money lender.
You’ve got a poor credit history. Hard money loans are based off the collateral of their investment, not your ability to repay. Loans made to consumers – as opposed to hard money lenders – are based off your ability to repay the loan. This means in case you’ve got a bad credit history or no steady income – then you might not get approved for financing. You need money. Private 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 find a hard money loan. If you can wait a few weeks, then it’s far better to get a hard money loan.
Hard money lenders can finance your deals fast
Hard money lenders assist a very specific group of individuals, i.e. property 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 generally property investors – typically, those who are being denied a traditional loan due to stringent guidelines.
Hard money lenders exist because they are fast, and offer loans with little to no headaches. Hard money lenders have a fast application system. They anticipate collateral and do not look at your credit score. They focus on your expertise, as opposed to your credit score. In case you have a checkered financial past, it’ll 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 traditional lenders do not touch:
Most traditional lenders won’t offer you a loan to get a fix and flip project. If the home is in poor condition, or there is some other abnormality with the home, then a traditional lender won’t give you funding. Additionally, most fix and flip prospective deals”go fast.” The seller is extremely motivated to sell the property, and will accept the first deal. Conventional lenders take forever, so by the time the loan is approved – you’ve already lost the property because someone paid cash for it. For those who 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.
Hard money loans a type of bridge financing
From time to time, your project goes over-budget and because of this you need additional capital. Some conventional lenders will deny, because the job isn’t completed. Though this can be devastating, a hard money lender may be willing to lend you the funds. Hard money lenders are happy to provide money to bridge the gap in funding, and can work with you to fill that void.
Hard money gives you leverage
If you’re a real estate agent, more funding means more deals. By using outside hard money, you can get involved in more simultaneous deals that would otherwise be impossible. Conventional lenders consider your overall debt to income ratio, and won’t give you funding if they believe you owe too much money. In contrast, a hard money lender doesn’t care about your income, nor do they care about your present debt. The one thing a hard money lender will care about is the value of your asset. Hard money loans are great for developers who need funds to get their project started but aren’t a good fit for traditional lenders. Keep in mind, traditional lenders aren’t interested in taking on extra risks – they legally aren’t allowed to after the 2008 economic crisis. Hard money loans are finalized faster than traditional loans from a bank, which permits you to move faster. Many property sellers will be flexible on their price and willing to cut you some slack – if you can show proof of funds. Many property investors that rely on traditional lenders cannot move fast due to delays due to the cumbersome guidelines traditional lenders have. Speed and unlimited money, is why hard money is good.