What You Need to Know About Hard Money Loans
A hard money loan is often the best financing option for real estate investors. If their focus is on fix and flip projects, they need to understand what a hard money loan is and how the process works. Let’s look at the basics of what investors need to know when dealing with this type of loan.
The Definition of a Hard Money Loan
A hard money loan is a loan secured by property’s market value. The loan is short-term and often used to fix up a property for a quick sale or rental.
Hard money lenders do consider the borrower’s credit, income, and experience. However, it is not as important as the value of the property itself in determining the loan amount and length.
This type of loan usually comes with significantly higher interest rates than traditional bank loans. They often go as high as 14%. The typical loan term is usually 12 months or less. Approval for the loan can take just a few days or weeks, instead of months like a typical real estate loan.
Who Are the Hard Money Lenders?
Banks and other traditional lenders do not issue hard money loans. A hard money lender can be private investors, smaller companies, and various small businesses.
Who Typically Uses a Hard Money Lenders?
Real estate investors need quick loans to finance their rental property upgrades or fix and flip properties. They have tried the conventional lenders like banks, but got their loan requests rejected. That’s why they go looking for hard money loans.These loans are a good alternative funding source for those who can’t meet the strict standards the banks set for income and credit scores.
What Types of Properties Can You Get a Hard Money Loan On?
The main focus for hard money lenders is non-owner occupied investment properties. These can include single-family dwellings, multi-family properties, condominiums, town homes, and commercial units.What Are the Differences Between Hard Money Lenders and Direct Private Lenders?
The answer to this question isn’t really easy to describe. The terms are used interchangeably, because they often perform the same service with slightly different terms.
One way to describe it is that a private lender offers loans to real estate investors who could obtain loans from a bank. The investors, however, are looking for loans that are faster and more flexible than what a bank offers. The private lender can often close loans in less than two weeks. Learn more about the differences here.
Hard Money Lenders Listed By State
It’s essential for investors to have access to real estate financing for their investment deals. Finding the right hard money lender is critical. You need a hard money lender that understands your local market for rentals or fix and flip projects. This makes it easier for lenders and borrowers.Check out your local hard money lenders. We’ve provided a list organized by state. Learn about the financing options available. You can also check out the featured markets around the country for real estate investing.