Why Use A Hard Money Lender

[LaMancha Sims]

The hard money loan is considered asset-based financing. This simply means that the person who is borrowing uses the physical property as security in exchange for financing. This type of transaction mostly involves real estate investments and is very similar to short-term bridge loans. Often referred to as bridge loans, hard money loans are short-term lending instruments that are also used by real estate investors for financing an investment project. This type of loan is a tool for house flippers who want to renovate or develop a property and then sell it for profit. These loans are not issued by banks or any other financial institutions, but by some private lenders. There are many reasons to consider getting a hard money loan instead of taking the conventional mortgage from the bank. Some main benefits of this lending option are the following:

Have fewer requirements

As compared to traditional bank loans the hard money lenders have few requirements. They just include a few requirements such as the borrower having enough equity in the property, sufficient cash on hand for making monthly payments, and a reasonable strategy to exit. On the other hand, banks have a non-ending list of requirements that a borrower must meet to qualify for financing. The interest rates for banks are lower however, the red tape makes the process longer and is many cases jeopardies the deal at any time prior to closing. This leaves the Investor in a position of uncertainty, sitting on pins and needles wating to see if anything will go wrong prior to closing the deal. Whereas, with the hard money lender the rates are higher but with limited red tapes the deal close faster ensuring the Investors does not miss out on the property and making profits.

Low credit scores accepted

It is not a secret to all of us that banks will deny you for having a low credit score. But on the other hand, hard money lenders make their decisions based on the profitability of property and less on the credit. So, this means that the investors who have a credit score of 600 or higher are normally approved for hard money loans. In case, even if the credit score is lower the investor maybe able to explain the situation to the hard money lender and still get the financing because of the overall deal.

Fast turnaround

As compared to traditional bank loans the hard money loans can close faster and has more flexible with terms and conditions. The main concern of any private lender is the value of the collateral. This means that your current financial status and employment situation are secondary considerations when using the hard money lender. You also don't need any tax forms, in many cases bank statements, or past experience.

Volume

The hard money lenders also allow you to leverage other people’s money. Meaning that investors can fund more than one deal at a time. In the case of traditional loans, you won't be able to do anything like this. Nor will a will the traditional bank financing all the renovation that maybe require to get the property up to a standard to sell. If you want to grow an investment business doing more than one deal at a time, then consider the hard money lender as one of your best options.

Convenient process

If you are applying for a mortgage, then you need to know that it is very time-consuming. Since the process can take in many cases more than 30 days to give you a loan this puts the investor at risk of losing a particular property. But with hard loan money, funding is possible in a few weeks only. This is particularly important if you are funding a large-scale development project. As in everything when investing compare the hard money lender that you plan to work with because all lenders are not the same. And as always remember no one makes money until they “Get in the Game!!”