Hard Money Loans

If there is a hail mary pass of real estate mortgages, it would be in the form of hard money loans. In the recent years, hard money loans have had a specific kind of bad publicity with shark loans taking over the market.

In this article, we will discuss the nature or hard money loans. What are  hard money loans all about? What are the types of properties that a hard money loan can be applied? What are the standard qualifications for the borrower to be entitled to it?

What are hard money loans all about?

A hard money loan is a short term loan. The lender asks for a security of real estate property owned by the borrower. It is funded by private investors so the requirements are more tedious than others. The loan usually lasts for around 12 months while those who are lucky can get the loan extended for up to a maximum period of 5 years. It is different from other loans because the monthly payments cover only the interest and the principal, often with a balloon payment, with paid at the end of the term. Hard money loans are only regulated to a certain degree because, again, it involves private investors.


What are the types of properties that a hard money loan can be applied?

Hard money loans can be applied for any kind of property. However, the approval of the loan depends on the kind of investor. Some loans are specific to one kind of property while others require that the property is not owner-occupied.

Hard money loans are also good as an investment if you are into the following activities:

  • Fix and Flips - these are programs where an individual would buy a property to fix it and match a certain level of standard, then sell it at a higher price.
  • Land Loans - when you are extending your property and you need a loan to help you get there.
  • Construction Loans - these are loans that are perfect for construction of a house in a property.
  • When the Buyer has credit issues - this one is self explanatory. If the buyer has credit issues and cannot go through the whole process of applying for a loan, the buyer would go through the path of hard money loans.
  • When a real estate investor needs to act quickly - when you need to be liquid quickly.

What are the standard qualifications for the borrower to be entitled to it?

The better part of hard money loans is the fact that the loans are not as strict. The investor have little care to the credit standing of the loan borrower in comparison to the amount of equity that he is trying to sell. The additional qualification comes in the form of a borrower plan that should be presented to the lender. How does the borrower intend to pay off the loan? Where would the money come from? These questions are pivotal in being approved for the loan but most professionals would say that it is not necessary because of the fact that the real property is used as a security so it is much like foreclosing a mortgage.


Try Out the Loan

Hard Money Loans may have had a bad rap in the past. However, a mortgage professional will tell you that it is there for a reason. While individuals with bad credit history may try to rebuild their credit and get a better credit score, loans of this kind are also repurposed and reevaluated to fit the needs of the individual borrowers. It is better to give it a try especially if it’s your last resort.

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