Individuals often seek hard money loans when they have an urgent need for cash. This can be because they do not have the time to go through conventional loan procedures or they have personal financial issues that would not allow them to qualify for conventional loans. Qualifications for hard money loans are not as rigid as when applying to a federally regulated banking facility because these loans are provided by private investors and corporations. Finding the right hard money loan agent for a specific situation will require some preparation, planning and research.
ABOUT HARD MONEY LOANS
Hard money loans can be the solution for a vast number of reasons such as financing a home in a remote location like a mountain range or desert region with few residents, for rescuing a family home from foreclosure processing and for real estate investment prospects. Loan agents may ask for several financial statements, look at a borrower’s credit score, analyze the value of the property for the loan to determine its use as collateral for the loan, and the borrower’s plan to pay back the loan. Lenders want to insure that they will be able to recover their investments if a borrower cannot repay the loan as agreed.
Hard money loans are short term and cover a few months up to a couple of years. Hard money loans can be approved in a short period of time and lenders can be flexible in their consideration of both the borrower’s ability to repay and the property’s future potential value when renovations are needed. Loan agents will not provide 100 percent loan-to-value for a property; their loan margin ranges from 50 to 70 percent so that their loan can be paid in full, on time, even if the property sells for less than the estimated 100 percent value. Lenders charge higher interest rates and points to compensate for the risks involved in hard money loans. These loans are to pay off any existing mortgages and will become the first mortgages on the properties.
LOCATING HARD MONEY LOAN AGENTS
Borrowers can call real estate agents or mortgage brokers to ask for referrals with private investors. The following websites have listings of hard money lenders. Borrowers can view the websites and fill out applications explaining why they need loans; interested investors will get back in touch with the applicants.