Getting Comfortable with Using Hard Money Loans and How to Find Them
Most real estate investors overlook hard money loans to acquire Property.
Investing in the real estate market would be better than letting a great opportunity pass you by! Hard money can work for anyone with experience as an investor or builder or who has found a brilliant deal. If you’re a new investor, you can still use hard money to build your portfolio quickly and partner with an experienced team. If you need more money for a down payment, if your credit isn’t perfect, or if you need to close quickly, hard money lenders may be a good option since they are primarily deal-driven.
Groups of private investors often provide funding for these loans from a lender’s pool of capital. The hard money lender’s goal is to maximize returns, and they are willing to take more risk to achieve it. Lending standards will be loosened as a result. You can borrow up to 100% of the purchase price if you strike the right deal. You can borrow part or all of your repair money from hard money lenders. Compared to conventional financing, hard money fees are higher. In many areas, hard money lenders charge 15%- 25% interest and 2-5% of the loan’s value at closing. Our hard money loans are on the lower side of both the interest rate and points mentioned at this time. Even borrowers with bad credit can generally obtain hard money loans. Most hard money loans require the investor to provide solid collateral – usually property equity – so they can get a loan regardless of their credit rating. You don’t need documents, you don’t need good credit, and you don’t need to worry about DTI!
Most Banks do not Issue Hard Money Loans
A hard money loan is rarely issued by a bank or deposit institution but rather by a private lender. Because hard money is usually not issued by a bank, hard money can be challenging to find. Also, once you locate a hard money lender, you want to go ahead and get your projects in line, as you never know when funds may be slowing down, ending, or on hold. Lenders who specialize in short-term loans offer them at higher interest rates. But again, the right scenario can be worth their weight in gold when coming upon a suitable investment.
Homeowners who need a big loan can typically apply for a second mortgage, using real estate as collateral. A homeowner can use equity as collateral, but bad credit can complicate things. The banks may refuse to provide more financing, but hard money looks at the deal even if you’ve missed a few mortgage payments. In this case, hard money, if located, might be the only option.
Hard Money Loans Terms and ARV
Hard money loans are typically limited to 60 to 70 percent of the quick sale price of a property. We allow 75% of the ARV. AFTER REPAIRS VALUE is not as it currently sits, nor based on the price being paid, but what the Property would sell for on the market.
.Imagine that the owner of a house wants to sell it to you for $60,000. Upon completion, the lender’s appraiser agreed with an assessment that the house could sell for $100,000. The appraisal would allow you to borrow 75% of the $100,000, or $75,000. You’re paying $60,000 for the Property, so guess where the extra $15,000 goes? You can’t put money into your vacation fund, unfortunately! The hard money lender escrows extra loan proceeds, and you would have access to them as needed. As you repair it or build it, you draw it out.
With our hard money program, your down payment is 25% of the land cost and are allowed to finance 100% of the entire build or repair cost. You can also acquire business credit and are instructed and guided on how to do this if you need 100% financing for the total project. If a borrower defaults, the lender can reasonably expect to realize the value of the loan. The loan and Property are absorbed by the lender and are liquidated quickly. That is one of the reasons hard money loans usually have a higher interest rate. This allows the private lender the ability to take a higher lending risk.
Again, hard money loans usually range in the amount of 15 to 25 percent interest. You always want to add in your hard money costs when estimating your project. If you buy correctly, hard money is an excellent way to get a great ROI when buying the right investment projects. Your hard money lender will help you break down your costs and give you an estimate of your given costs and projected profit. An itemized list enables you to determine your costs and profit.
As an overview, investors can obtain hard money loans to purchase a property as long as they can provide acceptable collateral. The strategy here is to find suitable collateral, which could be the Property they’re buying.
Places you can Locate Property for Hard Money Loans
As an example, pre-foreclosures or real estate with an owner willing to sell below market value is a good way to locate Property. If the investor can resell the Property at full market value before the property note is due, usually 12 months, they can make a significant profit. Let us help you identify the correct Property if you do not have one located.
Real estate investors have benefited greatly from hard money loans. Having the ability to “Close For Cash in Days” is very helpful to the real estate investor when presenting an offer.
Are you financially tapped out? It is also a fantastic way to free up your cash by using hard money. You are utilizing and leveraging other people’s money. It is the easiest way to get 100% financing with easy qualifying from hard money lenders.
Hard Money Loans for Rehab and Builders
Hard money is for fix-up rehabs and builders using fast closings! What else can hard money lenders do for you? Hard money lenders offer relatively short-term (12-24 months) loans. The loans are usually for 12 months and extended as needed. Hard money lenders also don’t calculate payments on a 30-year basis. A longer payment period results in a cheaper payment. These are calculated on a year-to-year basis. In such cases, you will be required to pay a higher monthly payment than if you were taking out a 15-year loan. On a conventional amortization schedule, it would take 30 years to pay off.
In addition, most hard money lenders require a prepayment penalty if you refinance. Alternatively, you can pay off the mortgage before a certain period of time. Fortunately, this time period is usually quite short. Therefore, hard money lenders offer investors an attractive opportunity to succeed.
Hard Money Loans are Deal-Driven
In conclusion, if you don’t have enough money for a down-payment, if your credit isn’t perfect, or if you need to close, hard money lenders may be a good option since they are deal-driven. Call Ronda at 407-460-7999 or email ronda@gustancho.com, as we are lending hard money in 48 states at this time and can go into further details concerning the above terms. Don’t wait to call, as terms and money costs continually change along with the ever-changing real estate market! Ronda 407-460-7999 or email ronda@gustancho.com