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Hard Money Loans Louisiana
What differentiates Louisiana hard money lenders from traditional lenders?
The critical difference between banks and hard money lenders is the fact hard money lenders are asset based lenders. They focus on the collateral associated with the by the person requesting the funds. But, traditional lenders focus on credit and how much cash the borrower has. It is critical to remember hard money loans aren’t great for the long run. The objective of a hard money loan is to be a bridge loan that which helps you get the home you’re trying to buy. Hard money lenders focus on short term loans that generate a significant ROI. If you are unable to repay the loan you took, a hard money lender can take over your property in order to settle his/her loan.
What are some negative of hard money
There are many reasons reasons why a hard money loan is a terrible idea. For instance, hard money lenders ask for higher interest rates. This is because of the fact hard money companies think they’re taking substantial risks by lending on an investment property – and wish to be reimbursed at a higher rate than what a bank would charge. High interest rates make hard money loans unattractive for some types of deals. In addition, hard money lenders have shorter terms than conventional lenders – which also makes them unattractive. Traditional lender provide 30 year periods but private money lenders offer only 1-3 year terms.
Hard money lenders can help finance your next deal
Hard money lenders work a very specific group of individuals, i.e. property investors. Hard money lending is a form of short term lending, which is secured by property. Specifically, the people who use hard money loans are typically property 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 expect collateral and don’t look at your credit score. They concentrate on your expertise, rather than your credit worthiness. If you’ve got a bad financial past, it’ll be much easier to obtain financing with a hard money loan as opposed to a conventional loan which is granted based on your credit report. Below are situations where hard money lenders fill a void that traditional lenders don’t touch:
Louisiana Hard money loans can be used for repair and flip real estate investors
Most traditional lenders will not offer you a loan for a fix and flip job. If the home is in poor condition, or there is some other abnormality with the home, then a conventional lender won’t give you funding. Additionally, most reverse and fix potential deals”go quickly.” The seller is extremely motivated to sell the property, and will accept the first offer. Conventional lenders take forever, so by the time the loan is approved – you have 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 get the fix and flip property.
Hard money loans are bridge loans
From time to time, your job goes over-budget and because of this you need additional money. Some traditional lenders will refuse, because the job isn’t finished. Though this can be catastrophic, a hard money lender might be willing to lend you the funds. Hard money lenders are delighted to give money to bridge the gap in financing, 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 money, you can focus on more simultaneous deals that would otherwise be impossible. Traditional lenders look at your overall debt to income ratio, and won’t give you a loan if they believe you have a lot of existing debt. 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 fixate on is the value of your property. 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 are not interested in taking on extra risks – they legally aren’t allowed to following the 2008 economic crisis. Hard money loans can close faster than conventional loans from a financial institution, which permits you to move quicker. Many sellers will be willing to work on their cost and willing to cut you some slack – if you can show you can pay immediately. Many real estate investors that rely on conventional lenders cannot move fast due to delays because of the cumbersome guidelines traditional lenders have. Speed and unlimited money, is why hard money is good.
Louisiana New Construction Loans
If you want to expand your business in Louisiana, there are several funding options available for new construction. A commercial construction loan is a loan that supplies funding for renovations or a new building. There is a difference in how a commercial construction loan works compared to a commercial mortgage.
How are a Commercial Construction Load and Commercial Mortgage Different?
A commercial construction loan provides you with most of the funds you need for your land development and construction costs. A commercial mortgage is for business owners that want to buy an existing building. There are differences in how a construction loan and mortgage disperse funds. A mortgage disperses a lump sum, you buy the property and pay your principal and interest in monthly payments. A commercial construction loan disperses payments in stages. With the dispersed money, you do the work until the next milestone and then you get more of the loan. Borrowers tend to pay the interest on the construction loan until the last payment is dispersed. Then, they use a commercial mortgage to pay off the construction loan because the monthly payments are lower and over a longer period.
Requirements for a Commercial Construction Loan:
- Down Payment – Usually 10% to 30% of the cost to build.
- Credit Scores – High 600s minimum. Business credit score is also reviewed.
- A debt to income ratio below 43%
- A debt service coverage ratio above 1.25
- Good financial records.
- Construction plans.
The requirements for a commercial construction loan are set by the lender. They are not all the same and some are stricter than others. The same is said for fees and interest. The interest you pay is determined by the type of loan and lender you choose. The fees you pay may include fund control fees, guarantee fees, documentation fees, processing fees, and project review fees.
Commercial Construction Loans:
- Mezzanine Loans
These loans are used by many to produce a down payment for a commercial construction loan. The loan is secured by stock in the business. If you default, the lender gets equity in the business. The interest rates are between 12% and 20%.
- Hard Money Loans
A hard money loan is a short-term loan that is easier to qualify for than a bank loan. The interest rates and fees may be higher. These loans are from private lenders and most have a term of one year.
- Bank Loan
A traditional bank loan for construction is based on the funding, timeline of the construction project and qualifications. Once the construction loan is paid a commercial mortgage takes effect, if the borrower chooses this form of financing. The interest rates and monthly payments are lower with this type of loan.
- Small Business Administration
The SBA has two programs for commercial construction. The 7(a) program is used for either the purchase of an existing building or for construction. The terms are up to 25 years.The CDC/504 loan term is for 10 to 20 years and the interest rate is fixed. A guarantee is needed from anyone who is an owner of 20% or more. These small business programs loan up to five million.
The application process can be lengthy. Having all your financial and construction paperwork in order will help the lender go through everything in a shorter amount of time. Lenders may request more information as they review your documents.