Hard Money Loans For Flipping Houses In Texas - Source ...

Published Oct 20, 21
4 min read

In Depth Look At Hard Money Loans - Freedom Mentor

Again, this is known as the “After Repair Value.” No matter what your reasons are for using a hard money loan, the lender you choose will also want to know your exit strategy (in other words, your plan for how you’ll repay the money you borrow). Since this type of loan would be short-term, the buyer has plenty of options following repairs.

This second strategy is a favorite among landlords. Conclusion for Property Investors Searching for a Hard Money Lender There are plenty of different hard money lenders available, so be sure you find a reputable company. Most mortgage brokers and REALTORS® and even traditional banks have connections with experienced hard money lenders and can usually recommend one.

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When you hear the words “hard money loan” (or “private money loan”) what’s the first thing that goes through your mind? Shady looking lenders who conduct their business in dark alleys and charge sky-high interest rates? In prior years, some bad apples tarnished the hard money lending industry when a few predatory lenders were attempting to “loan-to-own”, providing very risky loans to borrowers using real estate as collateral and intending to foreclose on the properties.

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In this article, we will go over the basics of hard money loans, including: What hard money loans are all about. The types of properties and deals hard money loans are appropriate for. What kind of interest rates and loan to value ratios to expect. Standard requirements of the borrower.

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What is a Hard Money Loan? A hard money loan is simply a short-term loan secured by real estate. They are funded by (or a fund of investors) as opposed to conventional lenders such as banks or credit unions. The terms are usually around 12 months, but the loan term can be extended to longer terms of 2-5 years.

The amount the hard money lenders are able to lend to the borrower is primarily based on the value of the subject property. The property may be one the borrower already owns and wishes to use as collateral or it may be the property the borrower is acquiring. Hard money lenders are primarily concerned with the rather than the borrower’s credit (although credit is still of some importance to the lender).

When the banks say “No”, the hard money lenders can still say “Yes”. Property Types for Hard Money Loans A borrower can get a hard money loan on almost any type of property – including single-family residential, multi-family residential, commercial, land, and industrial. Some hard money lenders may specialize in one specific property type such as residential and not be able to do land loans, simply because they have no experience in this area.

When purchasing a primary residence with good credit, income history, and there are no issues such as a short sale or foreclosure, conventional financing through a bank is the best way to go if the borrower still has time to go through the lengthy approval process required by a bank.

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Hard money loans are ideal for situations such as: Land Loans Construction Loans When the Buyer has credit issues. When a real estate investor needs to act quickly. Who Should Use a Hard Money Loan? Real estate investors choose to use hard money for many different reasons. The main reason is the ability of the hard money lender to fund the loan quickly.

Compare that to the 30 – 45 days it takes to get a bank loan funded. The application process for a hard money loan generally takes a day or two and in some cases, a loan can be approved the same day. Good luck hearing back about a loan approval from your bank within the same week! The ability to obtain funding at a much faster rate than a bank loan is a significant advantage for a real estate investor.

Interest Rates and Points for Hard Money Loans The interest rates and points charged by hard money lenders will vary from lender to lender and will also vary from region to region. For example, hard money lenders in California generally have lower rates than other parts of the country since California has many hard money lending firms.

Hard money lenders take on more risk with their loans compared to a conventional bank loan. Due to this higher risk involved on a hard money loan, the interest rates for a hard money loan will be higher than conventional loans. Interest rates for hard money loans range from 10 – 15% depending on the specific lender and the perceived risk of the loan.