FAQ’s of Hard Money Lending
You might be wondering if it’s hard to get a hard money loan. We certainly don’t think so! In fact, we’ve made it our business to make hard money lending extremely accessible to anyone, no matter if you’ve borrowed before or not. Here are some frequently asked questions and some cold hard facts of hard money lending.
Q: What is the difference between conventional lending and private hard money loans?
A: Conventional for loans are governed by Fannie Mae and Freddie Mac and income and credit are considered for approval. Whereas, private hard money loans are not regulated by the government, and offer short term lending with less restriction on the borrower’s income or credit.
Q: How do hard money loans work?
A: Hard money loans are short-term loans secured by real estate. They are funded by private investors as opposed to conventional lenders such as banks or credit unions. The terms are usually around 12 – 24 months. However, some lenders offer the option of three to five-year arms amortized for 30 years.
Q: How much is a hard money loan?
A: There are two main factors. One is the loan amount and the other is the experience of the borrower. The better your credit, the better your terms may be.
Q: Where can I find a hard money lender?
A: You can start right here, on our website. Fill out our application and have it reviewed by the many different lenders who also have access to our website. These lenders are waiting to come across loan requests just like yours!
Q: What do hard money lenders look for?
A: Hard money lenders are looking at the value of the collateral which in this case, is the property you are seeking money to buy, fix/flip or rent. In addition, a private lender may consider the value and history of the neighborhood in terms of growth, comps, and details such as your renovation plans and a detailed outline of your financial plan for the property. In addition, hard money lenders will obtain a credit and background check and may ask for your personal tax return, not for income calculation but rather as evidence you are filing annually.
Q: When and why should you use a hard money lender?
A: Hard money loans are meant for short term investments. Typically, 12 – 24 months. Hard money loans are issued far quicker than traditional bank loans. Closing with a hard money loan can happen within two weeks. Therefore, when you need financing quickly and given the competitive nature of the real estate market, we often do, a hard money loan makes sense. If you are developer looking to purchase a building with units for rent you should consider a hard money loan. If you are looking to make home improvements to add value to your home, you should consider a hard money loan. If you are a developer or individual seeking to purchase or flip/rehab a property and then immediately sell it, you should consider a hard money loan. To recap, hard money loans are used when the borrower is looking for leniency on credit and timing.
Q: How are hard money loans structured?
A: Hard money loans are structured based on a percentage of the quick-sale value of the property. This is called the loan-to-value or LTV ratio and typically ranges between 60-85% of the market value of the property. Your LTV will depend on your level of experience as a borrower and your credit.
Call us today to speak to a hard money expert! 203-974-3322