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The Ins & Outs of Hard Money Loans
Hard money loan uses and what to look
out for.
A hard money loan is a real estate collateral
loan based on the quick-sale value of the
property against which the loan is made.
Hard money loans are used primarily by real
estate investors who need money to close
quickly on a real estate transaction.
Reasons for investors using hard money
financing include the following:
- The transaction needs to close quickly.
Hard Money lenders typically can close
a transaction in less than two weeks,
some in as little as a week. This is in
contrast to a traditional lender that
may take 45 days to close a transaction.
- The borrower may have challenged credit
or have a debt-to-income ratio that is
not in line with what traditional banks
view as acceptable. Hard money lenders
typically work with lower credit scores
and ignore debt-to-income ratios.
- The property is too "ugly" for a traditional
lender. Hard money lenders will lend on
property that vacant or in need or substantial
repairs. Traditional lenders frown on
this type of property.
Benefits of a hard money loan are
speed, flexibility with borrower qualification,
and ability to lend on "ugly" properties.
Some hard money lenders even lend repair
money to fix up a property.
In taking out a hard money loan, the borrower
should take care to make sure he or she
has adequate financial reserves to make
the necessary repairs to the property (if
needed) and carry the note until such time
as the property is sold or refinanced.
Hard Money Related Articles
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