Long Island Business loans can be hard and confusing. However,…
Hard Money Loans Staten Island[yoast-breadcrumb]
If you are a real estate investment professional looking for a fast way to fund you purchases, you need to consider hard money loans. Delancey Street is a premier, and recognized, Staten Island hard money lender. We focus on providing opportunities to real estate developers – who simply need funding – in order to jumpstart their dreams.
Who is the right candidate for a hard money loan?
Traditional lenders don’t like dealing with real estate developers. They consider developers a high risk. In contrast, Staten Island hard money lenders like Delancey Street love real estate developers. While you may not qualify for a conventional loan, rest assured we’re happy to work with you. If you’re on our website, you’re probably doing more research about hard money loans and how one can help you. It’s critical you educate yourself about what hard money loans are, why they are a great alternative to traditional lending, and how we can help you.
What Are Hard Money Loans?
Hard money loans are collateral-based loans, which means the hard money lender focuses primarily on your asset or equity in the property. The lender does not care about your credit score or financial history in making a lending decision. The greater the value of your asset, the less risk for the hard money lender and the higher likelihood you will receive the funds you need. Hard money lenders care a lot about what your business plan is. We want to know how you plan on using our funds, and what your objectives are.
Requirements For A Hard Money Loan
There are very few requirements to qualify for a hard money loan. Whether it’s a bridge loan, investment property loan, fix and flip loan, cash out refinance loan, or purchase loan, the requirements for approval are generally the same.
Unlike banks and other traditional lenders, hard money loans are streamlined and efficient, allowing you to get funding quickly. Hard money loans require few documents and paperwork. Many investors utilize hard money loans when they don’t want to wait for a lengthy approval process associated with traditional lenders.
Credit Doesn’t Matter
If you have ever gone through the loan process of a bank or other traditional lending institution, you know it can be a tedious and sometimes boring loan process. They want to review your credit record and ability to repay the loan. Credit score is not important with Staten Island hard money loans because the hard money lender is asking for collateral to securitize your loan. Hard money loans are great for people who may not necessarily have a lot of money in the bank, but have a great asset which is worth more than the loan itself.
LTV stands for loan to value, and it’s super important to hard money lenders. Virtually every hard money lender will ask you what your target LTV is. This one number tells so much about your project. Most hard money lenders prefer to lend at 30-60% LTV. Anything greater than that is risky, and forces hard money lenders to scrutinize your loan further. If your loan is higher than 60-70% LTV, you should be prepared to explain how you’ll repay it – and lay out a concrete business plan. It is not uncommon for lenders to sometimes ask for additional assets in order to secure the loan.
You might think you need the bank to get onboard with your next real estate project, but you might find doing business with a private money lender easier. While banks offer great traditional mortgages, many private lenders offer a short-term alternative called a hard money loan. Also referred to as bridge loans, this financial product provides a useful funding mechanism for real estate projects.
Hard Money/Bridge Loans Defined
Bridge loans or hard money loans provide a one- to three-year loan to fund restoration, renovation or purchase of real estate. Commonly used for investment properties, they got the name bridge loans because they help the investor “bridge the gap” from their purchase to resale of the property.
Common Uses of Hard Money Loans
The hard money loan quickly puts cold, hard cash in the hands of real estate investors for projects including:
- renovations to flip a house,
- renovations to a rental property,
- purchase and transfer/resale of real estate,
- to bid and purchase with cash at real estate auction.
Private lenders extend bridge loans for purchase or renovation of single family or a multi-unit dwellings.
Since hard money lenders loan for both projects in good or poor condition, they use multiple valuation methods. For homes in poor condition, they use its after-rehab-value (ARV). For homes in good condition, they use its loan-to-value (LTV). The LTV is similar to the a conventional mortgage calculation.
Differences Between Traditional Mortgages
A traditional mortgage has more stringent requirements than a bridge loan. Traditional mortgages require a credit score of 650, for example. A hard money loan requires a credit score of 550.
A mortgage offers a slightly lower interest rate than a bridge loan, but requires more paperwork and a more lengthy approval time. A bridge loan offers an interest rate from seven to 12 percent. The loan disbursement fee ranges from one to 10 percent.
Many real estate investors can’t obtain another traditional mortgage. Banks limit the number of mortgages issued to a single person or entity at four to 10, depending on the financial institution. A hard money loan lets the investor fund their project so they can renovate and sell it or refinance it.
The bridge loan offers interest-only payments for the life of the loan.
Bridge loans also let an investor purchase a damaged property. Banks generally want to extend mortgages only on homes in good condition. This makes the bridge loan ideal for those involved in-house flipping.
General Hard Money Loan Requirements
Although easier to obtain than traditional mortgages, hard money loans still have requirements. You’ll need a:
- minimum credit score of 550,
- two or three months of bank statements,
- the property location,
- the property’s purchase price,
- resume of real estate experience,
- purchase contract,
- contractor bids,
- rehab scope of work.
A bridge loan from a private lender can help a real estate investor obtain a quick loan to move on a property. It provides renovation funding for fix and flip projects. In summary, a hard money or bridge loan offers:
- a pre-qualifying application
- a quick lender response,
- fast funding,
- simpler borrower requirements,
- interest-only payments,
- short loan terms of six months to three years.