These days more than ever qualifying for a loan can be challenging. A borrower with bad credit searching for a non-owner occupied loan can be nearly impossible.
A couple of years back when the economy crashed, banks were forced to create tougher requirements to meet when requesting loan money. As a borrower, if you do not have an exemplary credit score, a large income, and a steep money reserve, the chances of you receiving a loan are quite dim. Many potential borrowers are unable to obtain loans due to the credit standards that are available today.
As a borrower you should primarily look at traditional loans. Hard money loans might be much easier to obtain but one should not jump into hard money without looking at the possibility of a traditional loan. Rates on traditional loans are remarkably low in comparison to Hard Money lenders blog. Not only do hard money loans come with higher interest rates, they also require larger points in advancement.
Generally, the APR required for a deal also is higher by nature.
The main reason why a borrower would prefer to request a hard money loan over a traditional loan is time. Hard moneylenders are able to provide the borrower larger funds with constrained time. Most banks are committed to a long process and red tape that interfere with a client’s money attainment. Due to this matter, banks can take a minimum of thirty days to fund a borrower with a traditional loan. If an investor needs the money to be funded in, per se, five days the only option is hard money.
Qualifying for a hard money loan is often considerably easier than a traditional loan. Hard moneylenders themselves are investors who analyze the situation with the intent to maximize their return at a minimal risk. Although lender would ideally prefer their clients to have a great credit score, the loan is mainly secured by a collateral value. Hard moneylenders mainly look at the collateral value of the property and equity. It is important for lender to know that in case the borrowers cannot pay the loan, the lender is able to recover the money through foreclosure.
The collateral value is largely based on the marketability of the property, cash flow, and other factors. Hard money is great for investors who have a great opportunity in mind. In addition to the fundamentals of the property equity is also important. Hard moneylenders do not tend to bestow loans with more than seventy percent LTV.
There are investors who will perhaps loan money based on the property value post-repair. The flexibility of hard moneylenders allows them to fund certain investments that may seem to be impossible to any other lender or bank. This said, moneylenders tend to stick to certain guidelines that assure the protection of their own investment.