Philadelphia Hard Money Loans – Fast – Transparent
When you need to buy an investment property – you do what everyone else does, you go to a traditional lender. You assume the lender will help you get the necessary funding to move forward with your plans. Sounds simple, right?
The process of getting financing through traditional lending institutions can be a long drawn out process. There are often many hoops to jump through and pitfalls to watch out for. You may have to pay points on a traditional loan. You will definitely have to undergo a credit check and income verification process. Of course, there is no guarantee that you will acquire the financing you need even after you have jumped through numerous hoops. Traditional lenders have a very opaque, and long, process. Without sufficient funding, you can pretty much kiss your dreams of moving forward with your project goodbye. If you have gone through this sort of financial jerking around, you know how frustrating it can be. Now, if you’re on our website – it’s probably because you’ve heard about hard money loans, and want to know more about them.
More importantly, you want to know how a Philadelphia hard money lender can help you – and what a Philadelphia hard money lender is looking for when.
Credit or Collateral
When you approach a traditional lending institution for a loan, they have to do a credit check, verify your income and determine what kind of risk you pose as a borrower. This is because a traditional loan is acquired without any collateral. You can’t go to your local bank, and put your existing property up as collateral to guarantee the fact you’ll pay the loan back. Many people mistakenly think that banks will accept collateral – but they won’t. Most traditional lenders can’t look at the collateral you have for the loan. What they look for is your ability to repay the loan. Having cash in your bank accounts is helpful – in proving that, but the banks also look at things like credit score and employment history.
In contrast, a hard money lender doesn’t look at your credit score, etc. In fact, you could have awful credit and still qualify for this kind of loan. What a hard money lender is interested in is what kind of collateral you have in your possession. Hard money lenders are unique, in that they can accept collateralized assets to justify the loan. For example, if you ask for a loan to buy a property – the Philadelphia hard money lender uses the property as collateral in question to justify the loan. If you default on the loan, the lender takes your collateral, sells it and the money obtained is used to pay off your remaining debt owed to the lender or lending institution. In this sense, a hard money lender has a far better guarantee that they will get back their investment, because they are not depending on your credit score or any income verification processes to determine if you can pay back the loan.
Rather, they look at the value of the property you offer up for collateral as the basis for how much they can afford to lend you. If the value of the property is not greater than the hard money loan, then it’s unlikely you’ll be able to qualify for a hard money loan. If you still want to proceed with getting a loan, it’s likely the lender will ask you to put up other assets as collateral.
Loan Duration and Interest
If you purchase a home loan through a traditional lending institution, the loan will generally be set on a payback schedule of payments amortized over 15 to 30-years with a relatively low interest rate. Since a Philadelphia hard money lender operates like an investor, they are looking for a high rate of return over a shorter duration. The duration of a hard money loan is typically around 4 to 24 months. The interest rate associated with this kind of loan can be in the double digits. The advantage here is that you are not locked into a repayment schedule that stretches out potentially for decades.
Who Uses Hard Money?
Typically, the type of individual looking for a hard money loan is a real estate developer that needs to move fast on an opportunity. For example, if you are a real estate investor and a great deal has come your way, you may not have the luxury of wasting time jumping through hoops. By putting up property as collateral for the loan, you’re able to get competitive rates on loans.