Hard Money Opens Doors to New Clients

Hard Money is an interesting style of lending that many residential mortgage originators may not be familiar with completely. Some may even associate it with tough predatory loans that can get your legs broken if you don’t pay them back. In reality, hard money lenders are often used in construction and commercial real estate and are professional and easy to deal with.

In this day and age of strict lending guidelines, residential mortgage originators should become familiar with how hard money lending works. Not only can hard money loans sometimes be used as a rescue remedy for residential loans that fall through the cracks because of income-verification issues or low credit scores, it also can be tapped for single-family home construction and investment opportunities.

Best of all, because hard money lending is most often used for short-term “bridge loans,” originators can refer the hard money loan on the front end and then close another longer-term loan for the resale or refinance on the back end.

Lending locally

If you want to begin working with investors, or want another option available for clients with special lending needs, you first need to find a good hard money lender to work with. One of the best places to start looking is in your own backyard. This business is very much based on numbers, but there are serious benefits to having someone local finance your clients’ projects.

Having a lender you can meet face to face, instead of working with one across the country, is important when things hit a snag. You also want to develop a relationship with your lender because local lenders can get a lot more creative in their underwriting.

If your client hits a construction budget issue, for example, it will be easier to figure out a solution with a local hard money lender because they operate more like a mom-and-pop shop rather than a national lender. Most of the time local lenders also can close more quickly and with less red tape.

There are some downsides to using a local lender. One disadvantage, for example, is that they can run tight on funding at times. National lenders normally have institutional backing, so often have a lot more funding. The upsides to using a local lender, however, normally outweigh the drawbacks, compared to going with a national lender.

Finding a local lender should be fairly easy if you are already active in the investment scene. Many of them sponsor local networking events, which offer a great platform for you to introduce yourself. If you are new to single-family investing, find a local chapter of the Real Estate Investors Association or simply go online and search your local area’s real estate investor clubs.