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Thornton, Colorado, originally had approximately 8,000 residents in its one square mile of land area during its initial development. The city, located northeast of Denver, has come a long way. In fact, it’s one of the most popular places to invest in real estate. In a future-oriented place like Thornton, it seems like banks and credit unions would be willing to finance real estate dreams like buy a home or investing in property.
Unfortunately, that’s not always true. Banks and credit unions look at the bottom line: credit scores, debts and income. This left many borrowers without financing options, until now. Hard money loans are an alternative to traditional bank loans.
Hard Money Loans are Private Real Estate Loans
Companies and investors offer hard money loans to those who can’t obtain financing or need money pronto. A hard money loan is a type of real estate loan based on the value of the property. The property is used as collateral for the loan. Hard money loans are short-term loans which must be repaid within two to five years. The exact time depends on negotiated terms. Sometimes borrowers repay their loan within 12 months.
Types of Thornton Hard Money Loans
The term “hard money loan” is a general term to describe a variety of loans offered by hard money lenders. For example, a bridge loan is for an individual who have a goal of refinancing or reselling the property quickly. Other types of hard money loans include, but are not limited to:
• Fix-and-flip loan: This loan allows a person to purchase a distressed property with the goal of making repairs and selling it. The loan is repaid after the property is flipped.
• Construction loan: This loan is for real estate developers who want to start building now, with the goal of selling or refinancing the new construction immediately.
• Owner-occupied loan: This type of loan is for a person who doesn’t qualify for a traditional loan. Also, they have the goal of living in the property as the owner.
The Factors Thornton, Colorado Hard Money Lenders Consider when Approving Loans
Bank lenders and hard money lenders do look at credit scores, income and debts when determining whether to approve loans. However, hard money lenders do not base their lending decisions on those three factors. The lenders considered the collateral of the investment. This is the value of the property after a full appraisal.
Hard money lenders also require each borrower have a percentage of the loan, called the down payment. The value could be the loan to Loan-To-Value (LTV) or After-Repair-Value (ARV) ratio. Typically, the percentage needed is 20 percent. However, some hard money lenders may vary the percentage.
Some Negatives about Taking a Hard Money Loan
Hard money loans have some disadvantages. For instance, they have a high interest rate. A lender may charge 15 percent APR or higher. Since they are short-term loans, they must be repaid within that time period. The loans include a balloon payment. This is the last payment and includes all unpaid interest, fees and remaining balance.
Positives of Obtaining a Thornton Hard Money Loan
The negatives will vary according to the borrower. The positives associated with hard money loans will also depend on the borrower. The most common positives associated with hard money loans include getting money fast. Hard money loans are approved within a week.
Another positive is getting financing when banks won’t approve the loans. Flexible terms are another positive. Hard money lenders will usually customize terms to fit a borrower’s finances. This typically won’t happen with a bank loan.
Interested in a Thornton, Colorado Hard Money Loan?
The dream of owning real estate or investing in Thornton property should never be out-of-reach for borrowers who have the ability to repay. For those who need money fast, need financing or a home, contact us. We will get started with your hard money loan application today.