Are you looking for a loan to fund your real estate investment but are short on time and can’t qualify for a traditional loan? While working with a traditional bank loan is excellent for long-term investments, there are several reasons why you might want to go with hard money lenders for financing your next project. Hard money loans offer a variety of benefits.
A hard money loan is borrowed from a non-traditional, or hard money lender or investor, and the borrower must secure the loan with collateral, such as real estate or equity. The loan is short term, and the amount relies on the value of the collateral property. Hard money loans can be used by investors, groups, or individuals to borrow money without going through a bank. The repayment time for a hard money loan is shorter, and the interest is higher than on a bank mortgage loan.
When you apply for a hard money loan, the loan is dependent on your collateral and not your credit history. If you have a recent blemish on your record, bank mortgage lenders may not qualify you for a loan for several years. If you are rebuilding your credit score, it is more likely you will be qualified by a hard money lender if you have collateral to offer.
From the time that you fill out your application to the closing of the loan, six weeks may pass when borrowing from a bank mortgage lender. A hard loan is usually approved in less than a week, so your time spent waiting for financing after you apply is significantly shorter.
Making an offer on real estate with a hard money loan can make your offer stand out among other offers from bank loans. A hard money loan can make your offer stronger because hard lenders are less likely to pull financing than banks.
While a bank loan may be ideal for residential properties and long term investment, a hard money loan can be ideal for a variety of funding purposes. If you have credit issues, a hard money loan may be the best solution for funding, and it is also useful for construction projects, real estate investment, and house flipping. Some borrowers also use a hard money loan for leverage, refinancing, or as a bridge to prepare for a traditional loan.
A bank mortgage lender typically requires at least 20% down for the loan approval and may hold some of your loan payment interest in reserve. Hard money lenders are more likely to require a small down payment or no down payment at all. It is also unlikely that a hard money lender will request a reserve on your loan payments.
Hard loans are not underwritten by a bank, so their terms tend to be more flexible. Banks often provide inflexible terms and qualifications, but hard money lenders work with you on more favorable terms, especially if you have worked with them in the past. A hard money lender may go out of their way to get you a greater loan value for your collateral property if you have built a good relationship with them.
For more information on loans and lending, or to apply for a hard loan, contact Fidelity Funding in Glendale, CA today.