A Newby Investors Guide To Hard Money
Hard money loans are often used by experienced real estate investors to secure financing. That’s because they are easier to secure than traditional loans and have a quicker turnaround time, which can be crucial especially when there are multiple offers on a property. At times like this, it is particularly important to move quickly and that means having instant financing.
For first time investors, the idea of relying on a hard money loan can seem intimidating. Because they are secured through individual lenders instead of banks, they can seem riskier. In most instances, however, there is actually less risk involved with a hard money loan than a traditional loan. The key is understanding what they’re all about so that you can proceed with confidence.
What is a Hard Money Loan?
A hard money loan uses real estate as collateral and is paid directly from the lender’s own funds, rather than through a bank or credit union. They are generally short term loans, usually with a 1 year limit but sometimes extending for as long as 3-5 years. The borrower makes monthly payments with one balloon payment at the end of the term.
The amount of the loan is dependent on the value of the asset or assets used as collateral. The property used as collateral could be one the borrower already owns or the one they are purchasing. Because the loan is based solely on collateral, the borrower’s credit history isn’t considered as it would be with a traditional loan, which makes hard money loans much easier to secure.
What Can a Hard Money Loan Be Used For?
Hard money loans can be used for a number of real estate investments, including fix & flip properties, cash outs, refinancing, bridge loans, investment property loans, construction and land purchases. In most of these situations, banks will usually be reluctant to approve a loan as they consider them too risky. Hard money lenders are more likely to consider the potential for a high return and provide the necessary funding.
Another type of hard money loan is an estate or inheritance loan. In this case, heirs can borrow against property included in an estate until the estate’s assets are distributed. This can be helpful if an individual heir has an immediate need for cash that they can’t secure with a traditional loan.
Why Opt for a Hard Money Loan?
Since hard money lenders require no scrutiny of a borrower’s credit history and have a very quick turnaround time, they are ideal for situations that require financing in a hurry. With most traditional loans, banks can take 30 days or more to complete the transaction, where hard money lenders can usually provide approval within 3-4 days. This can make a hard money loan particularly advantageous in situations where there are multiple offers on a property and the borrower needs to move quickly in order to secure the purchase.
At the same time, a hard money loan may be a good choice if your financial history would make traditional lenders consider you a risk. Traditional lenders can turn away borrowers due to foreclosures, short sales, loan modifications or poor credit or if they recently started a job and don’t have enough income history. Hard money loans are far easier to secure since they are based on assets, making them the perfect choice for at risk individuals.
What Are the Requirements for a Hard Money Loan?
One of the main advantages of hard money loans is that they don’t have very many requirements. Check out this article link for a detailed guide of how to acquire a hard money loan. Since approval is based on assets used as collateral rather than financial history, the value of those assets is the primary factor that hard money lenders consider. The borrower’s credit will have some bearing on the loan, but it is not the primary consideration. More important is that the borrower show proof that they will be able to make the monthly payments on the loan and for rehab costs on a fix & flip property.
Find A Hard Money Lender You Can Trust
If you’re in the market for a hard money loan in California, Texas or Nevada, Lantzman Lending may be your answer. We have over 50 years of combined experience and we use our own money for financing so you can get the money you need as quickly as possible. To get an idea of how investors are using Lantzman Lending check out our recently funded real estate projects.
Once you fill out a hard money loan application, we’ll provide a quote within 24 hours and in most cases we’ll be able to close on the loan within 4-5 days. We don’t have to do a lengthy check of your credit history like banks would so you don’t have to wait for the money you need.
No matter what type of loan you need, fix & flip, commercial, construction or estate, Lantzman Lending is ready to help you. We’ll even work with you to tailor a loan to meet your specific needs and walk you through every step of the process. For first time borrowers, there’s no safer way to go than a hard money loan from Lantzman Lending.
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