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Seattle Hard Money Loans
Every now and then you might find yourself in a tight spot in need of some cash that is not forthcoming. Well, hard money loans might be you savior in such scenarios because they offer short term loans that are secured by property or real estate. These loans are funded by private investors that only require monthly interest payment and a balloon payment at the end of the designated timelines, which can be a few months or even up to five years. These private investors are not necessarily interested in the credit ratings and value rather they are concerned with the property value. Your property determines the amount of money you can get as a loan. The following are some tips of understanding how hard money loans work;
How they Determine the Ratios of Lending
The amount of money a lender is able to give you is determined by LTV (the loan amount divided by the value of the property) they basically lend between 65%-75% of the LTV value of the property. They may also lend money according to ARV (after repair value) which consists of the estimated value of the property after repairs which subsequently creates a riskier loan for the borrower and lender.
Necessities of Hard Money Loans
Most of the times, these loans are best suited for real estate investors because the lenders are able to provide funding faster than the bank. Thus, if you have a stable income and good credit rating, it’s advisable for you to go through the banks or credit lenders. Moreover, if you have experienced short sales or are undergoing foreclosure, you may consider approaching a hard money lender because they may consider the kind of equity you have for a loan. Real estate investors like these loans because in case of a property bidding competition, they can acquire a quick processed loan to push them further up the list of potential bidders.
Interest Rates Associated with Hard Money Loans
Since hard money lending firms are privately owned practices, the interest rates vary from one lender to the other. Wherever they are many lenders, the interest rates tends to decline to accommodate competition. Basically hard money lenders are prone to take up more risk as compared to the normal bank loan procedures. Hence, interest rates for their loans averagely range from 10%- 15% however this may vary depending on the ARV and LTV.
Properties that Hard Money Loans can be Issued
Hard money lenders are not choosy because they can offer loans on multi- family residential homes, commercial and industrial land, and other forms of households. However, because most of the lenders have been in business for long, they might have specific niches of the area of interest which is an important point to clarify before entering into a deal. They mostly might not like owner- occupied residential properties because they might have to undergo added regulations or restrictions.
Process of Acquiring a Suitable Hard Money Lender
It’s important that you conduct ample research before settling on a specific lender. Due to the high volatility of some of these loans, finding the most suitable person for your needs is very important. You can contact your local real estate investor for connections and also attend their club meetings to find out who is who in the business. All these strategies can help you in your search for a competent lender.
Before acquiring any loan, it’s important that you consider the collateral you are putting in line. The hard money lenders are private investors; thus, they are stringent on the guidelines they give you for repayment. Some time ago these people were often feared for swindling people off their properties, but change in real estate policies has brought normalcy to the sector.
However, that does not mean they are not going to move in on your property if you fail to comply with your due diligence. Some of their loans might have high interest rates as compared to banks and other credit firms; thus, they can be quite expensive. Unless you are at your lowest and lack any financing from banking institutions, hard money should be used as a last resort. They offer quick loans which you must have a plan to use them, do not just pick a loan without a specific agenda. Otherwise, you may fail to repay.
If you need money right away so that you can purchase a home, then consider a hard money loan offered in Seattle. This is a type of loan that allows you to secure the funds that are needed to purchase or renovate a home and then sell it for a profit, which is how you would then pay back the loan. A hard money loan usually isn’t for someone who already owns a house and just needs the money to make renovations for their personal gain.
There are a few different types of hard money loans that include a fix and flip version as well as a bridge loan and a construction loan. The type of loan that you would be approved for and that you would apply for will often depend on the length of time that you believe that it will take to get the home to a condition where it can be sold and whether you’re able to secure funding from another source. Another factor that goes along with the type of loan that you would apply for is whether you need to begin a new construction project or if the home is already on the property.
Keep in mind that a hard money loan might not be the type that you need. If you’re trying to get money for your personal home, then you’re probably going to find that you’ll be turned down. The loan that you apply for and receive will usually be paid back in a short time. Most loans are structured so that you can pay them back within a year. A benefit of a loan of this type is that you sometimes won’t need to make a monthly payment. You might have to make a payment that is on the interest amount instead of on the principal.
When you apply for a hard money loan in Seattle, you’ll see that there are quite a few benefits. The short term allows you to easily pay it off and move on to another home that you want to invest in and sell instead of dragging out the payments for several years. Another benefit of the loan is that it’s usually easy to obtain. There often aren’t as many credit requirements of this kind of loan as there are with other types. You need to remember that the loan is paid off through a balloon payment that is attached at the end, which means that everything will get paid at one time instead of you dealing with making monthly payments.
Before you apply for a hard money loan, you need to know how it differs from one that you would get from a bank or a financial company. They will both give you the money that you need to renovate a home or to purchase a home that you can renovate. The hard money loan is one that’s easier to get while a bank loan is one that often requires a higher credit score and even collateral that you would need to show before you can secure the loan. The lenders associated with a hard money loan are often a bit more forgiving of bad credit as they know that the loan will be paid back once the sale of the home is complete. The value of the piece of property that you’re going to purchase or remodel is at the forefront of the loan instead of your credit score or even past bankruptcies. Another benefit is that you can often use the money to purchase another property that you can fix and flip while you have the funds from the loan.