Here’s What Makes Hard Money Loans a Viable Financing Option
Hard money loans are a Viable Financing Option for many kinds of investors especially house-flippers and developers. Hard money loans are short-term loans that are used for real estate investments. Here is what makes these loans popular among investors:
Most Hard Money Lenders can fund in a matter of days after receiving all the necessary documentation, while traditional lenders can take months.
Because hard money lenders are more concerned with the value of the property, the potential borrower does not have to provide the same kind of documentation that they would have to provide to a traditional lender. Of course, hard money lenders still require the documentation on the asset that is being considered, not the borrower.
No credit, no problem. Hard money lenders do not have the same strict regulations as traditional lenders so if the borrower has no or bad credit, that can be overlooked. If the investor has foreclosure or any other negative items in their credit report, it will not hurt your chances of getting approved for a hard money loan.
Hard money loans are extremely flexible which makes them so popular with investors. Potential investors can negotiate the term, interest reserve, schedule, cash-out, financing and more. Traditional lenders do not negotiate with investors.
If the Loan-to-Value is too high, traditional lenders will turn down loans right away because of their strict underwriting rules. Hard money lenders decide what LTVs they will accept based on their affinity for the project, cross collateralization, possible equity participation, etc.
Hard money lenders invest in the value of the property or properties themselves, not the investor’s credit. Because of this, they are typically willing to accept different types of collateral as long as the borrower can present profitable collateral to secure the loan. This means the potential borrower should provide them with solid plans for the property, as well as value of the land and the property as it is currently, to give them a better idea of what they are working with. Transparency is important when it comes to hard money loans and that transparency goes both ways.