How To Get A Hard Money Loan
Have you tried to get a loan from the bank without success? Do you need to make a quick investment in property? Perhaps it's time to consider a hard money loan.
What Is Hard Money?
Hard money refers to a loan issued by private lenders for real estate investments. Typically, they are used by developers for fix and flip deals, land buying, and construction. In the case of fix and flip, a developer or an individual buys a property, renovates it, and sells it at a profit.
Hard money loans offer several advantages over conventional bank loans. First, the processing time is quite fast, often one to two weeks. Second, lenders may overlook your credit score, as they are more interested in the value of the property you want to buy.
However, you will pay much more in interest than with conventional banks. You will also need to repay your loan much faster, generally within 12 months.
Steps to Getting a Hard Money Loan
First, you should find a lender in your state, as most do not lend countrywide. Next, find out their terms. Do they lend to individuals or only groups? Do they give loans for owner occupied homes? What kind of property do they deal in? Some lenders only deal in a particular niche.
After finding out their terms, you need to present documentary evidence to show the value of the property. You will also need to present documents on your personal finances. While many hard money lenders are more interested in your collateral, they may still need documentation on your personal finances.
After you are approved for the loan, get the loan and move fast. You have only twelve months to repay the loan.
Words of Advice
Get all details pertaining to the loan, including fees and interest, clarified in advance. Because private money lenders are not very much regulated, you need to protect yourself. You are advised to consult a lawyer.
Please note that the lender will often fund a certain percentage of the value of the property after renovations. You are required to fund the balance. You need to have this money on hand. Also, have money to cover the closing costs and insure the property thoroughly.
Hard money loans are ideal for people who, for one reason or another, cannot get bank loans and need money quickly for real estate. Consult a hard money loans professional and be sure to check out the entire financial package, including the interest rates and other terms, to ensure that you're getting a great deal.