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Hard Money Loans Texas
Getting a loan with the help of traditional lender is a real hassle, particularly once you have a poor credit history. With a low credit score, it might take you weeks or even months to be qualified for mortgage. It isn’t important that sometimes you are in severe need of quick cash. Hard money lenders, on the other hand, think about the collateral you’re giving up rather than your financial capability to pay the loan back. Hard money loans are often meant to help businesses financially or buy a home. In the event you fail to repay the money given to you, the lending institution will take ownership of the collateral and sell it to receive their initial loan.
Hard money is are most suitable and beneficial to investors that want to renovate or improve a real estate property prior to selling it at a higher cost. The investors are able to sell it at a profit and pay back the borrowed cash in a brief period of time.
Texas Hard money loans have short approval timelines
Hard money lenders are not concerned about your credit rating. Hard money lenders are more concerned about the security and will process your loan quickly if if you can prove the value of your collateral. It’s very important to note that hard money lenders aren’t necessarily interested in taking ownership of your property. They are quickly because they spend less time verifying your income, bank statement, along with other details. They only worry about the potential value of your property.
Unlike the standard loans, hard money loans arrangements and terms are flexible. Rather than dealing with a huge corporation, you will be speaking to an individual who’s willing to help you design the ideal repayment plan. They don’t follow or set standardized procedures when setting up your loan repayment schedule.
In regards to borrowing a Texas hard money loan, the creditor is more concentrated on security. If you want to invest in real estate, the lender will provide you a loan value as much as the property. In case you have other financial assets to put up as collateral, the bank will also consider its value before approving the loan.
In case you have any difficulties with your credit history, then it won’t be that important. Some lenders don’t even consider your credit score.
In terms of loan-to-value ratios, hard money lenders keep them to the minimum with the maximum being between 50 and 70 percent. They do so to give themselves a better chance of getting their money back should they must sell the property after your inability to repay the loan.
It is possible to apply and receive a Texas hard money loan within a matter of weeks. This is valuable, especially to borrowers looking to purchase mortgages. The buyer won’t wait too long to acquire the cash he or she wants to pay a hot potential deal. Traditional loans involve a much longer process and take the time to be accepted.
Unlike the conventional loans that require longer to be compensated, hard money loans are designed as a brief term lending instrument. This means that you need to repay the loan in the shortest time possible before the creditors repossess your house. If you do not fulfill this condition, the lender will take the property into the market to try and return his/her money.
In contrast to the traditional loans, hard money loans are costlier. In addition to the loan origination, you’ll also pay closing and servicing expenses. If you take a hard money loan a mortgage, it may cost you 10 percent more than it might have on the traditional loans. Needless to say, hard money loans are much convenient.
The interest rate for repaying the hard money loan is also high because the lenders are facing greater risks when lending you the loan. The interest rates generally range between 9 and 14 percent.
Requirement of Equity
Before giving you a hard money loan, lenders ask that you give a down payment of up to 25-30 percent. This can be supposed to act as an incentive to motivate you to adhere to the agreement. This is because they attempt as much as possible to keep you thinking about paying their money back. It also helps the creditor to tie you to the contract even when you realize you are making a loss.
Before committing to a hard money loan, you should first assess all the available lenders, their prices, and conditions. It’s also wise to consider the benefits and drawbacks of Texas hard money loans before applying for one.
If you are unable to get approved by a traditional mortgage lender and you need to find another option, a hard money loan might be the solution. Hard money loans are offered by private individuals or investment firms that take a different approach to lending. Keep reading to learn more about hard money loans so that you can determine if they are a good option for you.
About Hard Money Loans
Hard money loans are real estate loans and they are approved based on the value of your collateral as opposed to other factors considered by traditional mortgage lenders, such as your ability to repay. Not that your financial standing isn’t important, it just isn’t the primary consideration. In fact, hard money lenders have the autonomy to look at each loan on a case-by-case basis to make a funding decision. It’s a process that involves far less red tape than bank loans.
There are different types of hard money loans, such as fix-and-flip, bridge, owner-occupied and construction. Each type is obviously for different purposes. Bridge loans let you buy a property fast, then refinance or resell it. You can also use it to buy a property before getting the cash down payment from the sale of a property you already own. Fix-and-flip loans are just that – it’s for buying a property, fixing it up and reselling it, at which point you pay off the loan. There are also new construction loans and owner-occupied loans.
In the hard money lending arena, owner-occupied consumer loans are less common because they require compliance with far more regulations than loans for investment properties, such as Dodd-Frank. Hard money lenders tend to steer clear of lending that causes regulatory complications. They also avoid consumer loans because of certain licensing requirements. Nevertheless, there are still some hard money lenders who will provide owner-occupied consumer loans.
How Hard Money Loans Work
One of the reasons why hard money loans are appealing to real estate investors is because the application process is easy and fast, sometimes less than a week. Quick financing can mitigate some of the less desirable aspects of hard money loans in the mind of some investors. Generally speaking, hard money loans require you to put cash down, and the amount is based on your property’s Loan-To-Value (LTV) ratio or After-Repair-Value (ARV) ratio. Just keep in mind that every hard money lender has different criteria.
Hard money loans have a short term that’s usually 12 months, but can be several years. Instead of making monthly payments to the principal and interest, you will typically make interest-only payments. In fact, there are some instances where you don’t make any monthly payments. Instead, you simply make the balloon payment at the end of the loan term. The balloon payment would consist of the entire principal, any unpaid interest and all fees.
Is a Hard Money Loan Right for You?
If we lived in a world where everyone could get the money they need through traditional bank loans, hard money loans would not exist. When making a decision about whether this loan product is a good option, you’ll need to assess the pros and cons. There is usually no way around the fact that hard money loans have high interest rates, a lot of fees and a very short term. They can also be hard to refinance because of the “seasoning” period of traditional mortgage loans, which requires a minimum length of time before you can refinance. Obviously, these issues should be avoided, if possible.
On the flip side, there are situations where a hard money loan is beneficial because it provides access to quick money, the requirements are less rigid and the terms are flexible. This means you will have the money that you need for investment opportunities that arise.