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Updated almost 3 years ago,
Non-QM vs Hard Money loans
Hi everyone! I'm looking into loan options. I just got off the phone from speaking to a lender. I don't qualify for an FHA or regular conventional loan due to the fact that I did a short sale in 2016 so I was asking him about doing a hard money loan. He told me that even with hard money loans which are for short term investments you are required to keep the loan for 6 months or a year??? He said if not they will hit you with a pre-payment penalty? Is this true? He recommended I do a Non-QM loan, which I had never heard about but he says if I do the full document version of this loan ( they verify income) I can put 10% down instead of 20% as with a hard money loan and the interest would be 6.75% vs 12-15% with a hard money loan. Obviously the Non-QM loan sounds like a better option, but I'm still stuck on what he said about having to hold the property for at least 6 months regardless of loan option. Anybody know the ins and outs of hard money loans that can verify this?
@Diana Rivera I am sending you a pm.
@Diana Rivera there are no blanket statement loans out there. Some HML will require a penalty, but many won't. Shop around and find someone in your local market. Good luck.
@Bob Woelfel You are right.
Originally posted by @Diana Rivera:
Hi everyone! I'm looking into loan options. I just got off the phone from speaking to a lender. I don't qualify for an FHA or regular conventional loan due to the fact that I did a short sale in 2016 so I was asking him about doing a hard money loan. He told me that even with hard money loans which are for short term investments you are required to keep the loan for 6 months or a year??? He said if not they will hit you with a pre-payment penalty? Is this true? He recommended I do a Non-QM loan, which I had never heard about but he says if I do the full document version of this loan ( they verify income) I can put 10% down instead of 20% as with a hard money loan and the interest would be 6.75% vs 12-15% with a hard money loan. Obviously the Non-QM loan sounds like a better option, but I'm still stuck on what he said about having to hold the property for at least 6 months regardless of loan option. Anybody know the ins and outs of hard money loans that can verify this?
The person you spoke to was partially right about hard mnoey but not in every case. So hard money usually has terms of 6 months to 12 months but they don't all have prepay penalties. That is something to ask. Hard money loans vary in down payment but it can be from 25% to 10%, it is all over and varies lender to lender. Hard money also often lends funds to fix up property as well as purchase it. If you are planning on living in the property hard money is out.
@Diana Rivera good luck and let us know what direction you go. If you do pursue a non-QM, please pass on the contact.
Thanks!
Diana I am a non-QM Lender Broker. Non-QM is a great alternative especially for turnkey rental or even a FixnRent to Permanent Hold solution with really competitive interest rate close traditional rates but slightly higher. If you are looking to buy a home owner occupied, you can get you in for as little as 5% down BUT the interest will be a LOT higher. What exactly are you looking to do?
Originally posted by @Diana Rivera:
Hi everyone! I'm looking into loan options. I just got off the phone from speaking to a lender. I don't qualify for an FHA or regular conventional loan due to the fact that I did a short sale in 2016 so I was asking him about doing a hard money loan. He told me that even with hard money loans which are for short term investments you are required to keep the loan for 6 months or a year??? He said if not they will hit you with a pre-payment penalty? Is this true? He recommended I do a Non-QM loan, which I had never heard about but he says if I do the full document version of this loan ( they verify income) I can put 10% down instead of 20% as with a hard money loan and the interest would be 6.75% vs 12-15% with a hard money loan. Obviously the Non-QM loan sounds like a better option, but I'm still stuck on what he said about having to hold the property for at least 6 months regardless of loan option. Anybody know the ins and outs of hard money loans that can verify this?
Diana, I just sent you a PM
Hey Diana, Just reading through this thread as I connected with a Non QM Lender today regarding a 3 unit rental property. How did things turn out?
From my initial conversation with the lender he said his interest rate would be around 7%. Given 30 year fixed is around 5.25% today I figured it would be okay since he would be qualifying me based on DSCR not DTI.
Let me know how things worked out.
Hey @Diana Rivera I've come across short-term (1-year Interest-Only) hard money loans with better options for pre-payment penalty than 1-year. For instance, a lender may have a guaranteed-interest requirement (typically 3 months) instead of charging a percentage based on the remaining loan balance at the time of payoff. To break it down even further, if you sell or refinance within, let's say, the second month, you'll be responsible for paying an additional 1-month of interest to make up the 3 months.
Hope I explained that well, feel free to message if you have any questions or concerns.