Hard Money Loans

According to various real estate experts and market analysts, now is the perfect time to own a home or to invest in residential properties. With mortgage rates reaching an all-time low and home prices continuing to decline, the current real estate market provides consumers with a great opportunity to secure a place that they call their own.

Despite the “inviting” market conditions, however, many consumers, prospective home buyers, and investors are still finding it difficult to buy residential real estate. One major reason is their lack of personal funds. Another is their failure to qualify for traditional loans due to certain reasons.

Fortunately, there are lenders who are willing to help retail buyers and real estate investors secure financing to buy a home. By providing consumers with hard money residential loans, these lenders are giving them the chance to accomplish their goal.

Unlike banks, mortgage companies, and other conventional lending institutions, hard money lenders are willing to provide financing to borrowers with low credit scores or unverifiable sources of income. In addition, they are also willing to let others use their money to buy and renovate distressed properties, which is something that most traditional lenders won’t do. As long as the borrower is spending the funds on a property with great after repair value (ARV), a hard money lender will allow the former to qualify for a loan even if he or she has a poor credit rating.

How hard money residential loans work

A typical hard money loan has a loan-to-value ratio of at least 65%. This means that you’ll get 65% of the appraised ARV of the property that you want to purchase using hard money. To give you a clearer picture, here’s an example.

Let’s say you’re planning to buy a house worth $40,000. The appraiser tells you that the property is worth a hundred grand once all the necessary repairs and renovations have been carried out. If the property has an ARV of $100,000, then the hard money lender will give you $65,000. So subtracting the property’s purchase cost of $40,000 from the $65,000, you’ll have $25,000 remaining, which you can use to improve the overall look of the property.

To qualify for hard money residential loans, meanwhile, you have to ensure that you’re borrowing hard money for a property that has a high ARV. The higher the ARV of the property you want to buy, the bigger your chance of getting the approval of a hard money lender.

For more information on borrowing hard money loans, visit www.RehabHardMoney.com.

If you’re in dire need of cash as soon as possible, a hard money lender might just be your knight in shining armor. Also known as private lenders, they are lenders that grant hard money loans.

To be able to understand what private lenders do, it is better to first define what a hard money loan is. It is a type of loan through which a borrower receives money secured by the value of a real estate. This type of loan is mostly given to real estate investors and realtors. Investors use this loan to get money to finance their real estate investments.

Hard money loans are perfect for investors who are just entering real estate investing. Investors who do not have enough money and have bad credit histories can benefit greatly from hard money loans. Private lenders can grant a hard money loan without considering a borrower’s credit score or income. The property’s value will be the deciding factor whether or not a borrower will be approved for a loan. If the property does not have any resale potential, then no loan will be granted.

It won’t be hard for an investor to negotiate with a hard money lender because most of them are investors too. A private lender can understand your needs better which is why the negotiation will be more flexible unlike with traditional lenders. Banks and traditional lending institutions do not deal with hard money loans since the risks are high.

However, even if the hard money loans are known to be fast and easy money, the interest rates are not the same with banks. Since private lenders loan their own money, risks are higher and so as the interest rate. The rates vary from lender to lender so you have to find the right lender who can provide your needs.

You can find hard money lenders anywhere, provided you know where to look. You can ask referrals from your neighbors, real estate agencies, and mortgage companies. The internet is another way for you to find a lender. Take time in finding the right lender since the terms vary from lender to lender.

Now that you know something about hard money loans and lenders, you can now make smart decisions whether to ask the help of a private lender or not. You can always visit REIwired.com to get more tips and information about other forms of real estate investing.

True: Hard money loans have higher interest rates than traditional loans.

False: It is not advisable to use hard money loans when you’re in real estate investing.

In fact, it is the complete opposite. Experts recommend that rehabbers, or those who are involved in flipping houses, use this kind of financing for one simple reason: “Good investors look at the rate or return not on the interest rate of the loan.”

In flipping houses, you spend little to repair a house and sell it at a much higher price. For instance, if your hard money loan is based on an 18% interest rate but you will get a 75% rate of return, it will still be better to go for hard money financing, which is fast and payable on short term.  Note that 18% is a common rate. Sometimes, the interest rate is 13% and the origination fee is 5%.

Traditional loans offer much lower interest rates but these also take a lifetime to process. While traditional loans take around 30 days minimum to process, hard money loans may be approved in just days. If you build a good rapport with the lender, he could even give you cash in just two days! That’s getting cash fast and saving a good deal from being snatched by competition who already have ready money.

As we also remember, hard money is collateral-based. The collateral used here is the house the rehabber plans to buy, repair, and sell. Hard money lenders do not scrutinize a person’s creditworthiness. Instead, they check if a borrower will make good money from the deal he wants to close using the cash he is asking for. If your loan is approved, most likely that means that your deal will yield profit and your hard money lender will also benefit from it by lending you the cash you need.

You can learn more about hard money by visiting RehabHardMoney.com. RehabHardMoney has a Frequently Asked Questions section that can educate you on this form of financing. You can also pre-qualify for loans nationwide just by filling out a form on RehabHardMoney.com. RehabHardMoney also has a section for borrowers of commercial hard money and for hard money lenders looking for prospective clients.

Hard money has been the go-to financing for rehabbers, or those in the flipping houses business. It is a popular source of funding to veteran house flippers as it east easy and fast access to cash. Many beginners, however, are afraid to try this method of financing just because they have misconceptions about it.

The Myth On Getting Hard Money

Contrary to what its name bears, hard money is not that hard to acquire. It actually is the opposite. Hard money lenders are found across the country are always in the search for rehabbers to help. Unlike traditional lenders such as banks, those who offer hard money loans usually operate on their own. That means that if you convince the hard money lender, you will get the cash you need.

Banks, on the other hand, usually use teams to process loan applications. These teams thoroughly assess a candidate for credit. Loans will also need the approval of more personnel. This is one reason why it is so much faster to for hard money loans to be processed. While loan applications in banks usually take at least 30 days to process, some hard money lenders can give you the cash in just two days.

RehabHardMoney.com, for instance, approves (or rejects) applications in at least two days. The web site uses a pre-qualification system wherein buyers who sign up online can pre-qualify for hard money financing wherever they are in the country.

This system works perfectly for rehabbers. If your application is unfortunately turned down, then you will be able to look for a new hard money lender or other forms of funding to finance the fixer upper project you wan t to pursue. As they say, if you will fail, fail fast and be back on your feet faster.

Avoid The Hard Rejection

Rejection sparks self evaluation. But in the case of getting hard money loans, it sparks an evaluation of the property you want to flip. Hard money lenders mostly do not scrutinize the credit score of a borrower. What they assess is the property a borrower will flip with the money he is asking for. They will determine whether the house will yield a positive return and if you will be able to pay the loan with the profit.

If your application is rejected, then you might want to reconsider and re-evaluate the fixer upper you plan to rehab. By the way, banks always assess the creditworthiness of a borrower. This means that you must secure a high credit score, a good credit report, or show proof that indeed have the ability to repay the loan. This process, again, is more tedious and time-consuming compared to hard money loans.

Where To Get It

You can ask your colleagues in the business for referrals if you want to look for hard money lenders. Another option is for you to search online for the closest lender in your area. You can check RehabHardMoney.com and fill out a borrower’s form. Signing up will prequalify you for hard money loans. Rehab Hard Money will also take care of the searching for you. All you need to do is go to RehabHardMoney.com and click the Hard Money Loans link. Don’t let you cash buyer problems stop you from flipping houses and making a fortune from the business.

Real estate investors turn to hard money loans when they need fast and easy cash. Got bad credit history? No problem, get a hard money loan. Need cash to finance repairs and rehabs on your property? Your local hard money lender can give you what you need. It’s as easy as that.

Usually, investors turn to hard money loans when traditional lenders turn their backs on them. An investor’s project may not be one that traditional lenders approve of, so they go for hard money loans. All you need is a good deal and you will get the money.

How much is the loan?
Since hard money loan is based on the value of a property as collateral, a borrower’s income or credit history will not affect the loan. In addition, the amount of the loan is at 60%-70% of the After-Repair Value (ARV) of the property. The ARV is the value once necessary repairs have been made on the property.

Why fast cash?
Hard money loan is considered to be fast cash because transaction takes only a short period of time. Usually, borrowers go through a lot of processes to get their loan approved. Banks require longer paperwork and evaluation before they reach a final decision. Since had money lenders are mostly real estate investors themselves, they easily make decisions once the value of the property is determined. Borrowers will not have much problem on negotiating with lenders since they are more lenient and flexible.

Where to find hard money lenders?
Today, finding hard money lenders weren’t as hard as it was before. Thank god for internet, you can easily search for the right hard money lender that will provide your needs.RehabHardMoney.comprovides a meeting point for hard money lenders and borrowers. Lenders can get steady stream of loans by joining the site. Borrowers who will visit the site will get more information about hard money loans and may actually get one.

Hard Money is an interesting financial animal. Its
history is colorful to say the least. Born by the need
for rehabbers to get access to funds when a property is
in disrepair and which no bank would lend on, it has grown to a
multi-billion dollar industry.

The early lenders were ex-real estate investors who had
made a few dollars in real estate and then became
lenders in their local area. Now the industry is rapidly
moving toward larger financial institutions and even
larger banks.

As a newer real estate investor, becoming familiar with
how to work with hard money can be one of the most
profitable things you can do early on. This is truly the
information business. If you are able to secure a contract
on a single family home (non-owner occupied) you may
be able to borrow 100% of the purchase costs and even
some or all of the fix up money and closing costs.

One of the most important, but often overlooked, benefits
of working with a hard money lender like this is that someone
with a vested interest in your success has agreed, by virtue of
approving the loan, that you have a real deal.
This can be such a huge bonus for the new person. It can force
you to do your homework when contracting properties to buy.

Honestly properties that fit into the hard money parameters are
some of the best real estate deals out there. So if you get a
property approved for a hard money loan congratulate yourself!

Some of the specifics you need to keep in mind when shopping
for hard money are:

ARV

ARV stands for after repaired value. This number is
important because the amount of money you can borrow is
derived from what the property will sell for when youre
done with your repairs. So know your values. Know what
completely renovated houses will sell for. Most hard money
loans are based on 60 to 65% of the ARV. That means if you
buy a property that will be worth $100,000 when the repairs
are complete you will be able to borrow up to $65,000 from
the lender. This could possibly even include the repair costs
and closing costs if your contract to purchase is low enough.

I think its important to mention here that some people falsely
believe that it is impossible to buy a house for less than 65%
of what it would be worth fixed up. Remember this did not
become a multi-billion dollar industry because the hard money
lenders arent lending money. It is absolutely possible and done
every day. So get out there and find a house

Interest rate: While this is are rapidly becoming
standardized there is still a lot of fluctuation in interest rate
from lender to lender. Dont get bogged down with the
interest rate. The norm is between 12% and 18% or more in
some states. While this sound preposterous compared to what
a normal home loan interest is think of it as access to
capital. The money will only be out from three to six months
You should look to pay what is now becoming the average
which is 13% to 15%.
But competition is forcing the rates as low as 11%

Points: Heres where you do need to be concerned and do
some shopping. Points vary from two, which is rare, to ten
also rare these days but more common than you would think.
The average these days is in the 4 to 6 point range. Now when
you consider a point is one percent of the total loan amount just
a $100,000 dollar loan could range in fees from $1,000 to TEN
thousand dollars. Now that could cut into your profits.

There are other things to consider when shopping for hard money.
One of the first things you need to check on is the availability of
becoming pre-qualified. Does hard money lender have a process
to get you prequalified for the loan? Also, will they issue a very
important document to you call a proof of funds letter. This is very
important as most banks and Realtors and even some sellers these
days will require proof that you are able to fund the transaction.

Second is the pre-payment penalty. Youll want to look into this.
Most hard money lenders dont have one any more because they
realize the loan is just for a short time, but still – ask the question!
Some actually do have time limits like six months or a year in which
time the loan needs to be re-paid but they usually offer a payment
program to extend the loan longer. First off, you
dont want to have the loan out that long but if you do – you want
to know your options.

Heres the thing. Dont let this process scare you. As Ive stated
above working with a lender like this is a good thing. You do
your part and find a good, undervalued home to put a contract on.
Then work with your lender to get the house approved. Remember
youve already been pre-approved for the loan so use that proof of
funds letter to get your first or next property.

Author: Mike Collins
Article Source: EzineArticles.com

Although the hard moneylenders were largely affected when real estate industry crashed in the 80’s, recent credit crunch has brought more business to this sector. People who are in need of loans are turning towards hard money loans after the financing by traditional lenders and banks has come to a halt. The casualness and irresponsibility of these banks and lenders when giving out loans in the past has hit them hard and they are going through a severe liquidity crisis. With this serious drop in supply for finances, hard moneylenders are seen as a reasonable alternative. People and businesses are short of funds, and naturally they have to go for the best substitute available. A hard money loan comes as a last resort in such situations.

Characteristics of a hard money loan:

Hard money loan goes by the principles of mortgage; the distinguishing characteristics are the interest rate and the time consumed in approval. A loan application can take quite some time before getting through all the procedures and verification process that are part of a bank policy. Whereas hard money loans are issued normally by private lenders (though you can find many commercial hard money lenders as well) in relatively short time at higher interest rates and lower loan to value (LTV) ratio. The interest rate or loan to value ratio is not fixed and it keeps changing with the ups and down of real estate market. Hard money loans are often for short period of time (also known as bridge loans) that means the correct quick-sale valuation of the property is vital for the lenders.

Some tips for the borrowers and lenders:

As a borrower, you need some extra efforts to convince hard money lenders (these extra efforts are compensated by their fast approval time, once they are convinced), a hard money lender will believe you more if you are ready to put your cash into the deal as well. This is why they emphasize on low LTV ratio more than your previous credit score when compared to traditional lenders. Along with the advantage of their availability in even hard financial times, they are a much better option when you need quick finance. Being a lender, you should be extremely careful when determining the current value of property. Over estimation or wrong valuation can cause you serious loss in case of default. Also borrowers should try to reach hard moneylenders themselves, without bringing too many agents and brokers in between, as it will save them lots of upfront costs and expenses.

Author: William King
Article Source: EzineArticles.com
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One of the best scenarios for commercial hard money loans is when the borrower has an opportunity that he knows he will make a substantial amount of money on, needs to move on it immediately, and regardless of the fees the hard money lender charges. With this scenario the profit the borrower will make will easily offset the fees the borrower has to pay to the commercial hard money lender.

Commercial Hard Money Loan – Scenario 1

For example, we have recently worked with a borrower that had an opportunity to purchase a fleet of trucks for his business at a 50% discount. Total purchase price on the trucks was just over a million dollars with a value over $2,000,000. On the commercial hard money loan the borrower had to pay 3% in fees in order to get the loan or $30,000, to be able to save over a $1,000,000 of needed trucks for his business. He collateralizes the commercial hard money loan with his building and was able to close in 3 weeks. So $30,000 in fees to save over a $1,000,000…

Commercial Hard Money Loan – Scenario 2

Another similar example is when a borrower wants to purchase a property from a distressed seller at a substantial discount. Typically the seller can’t wait 60 to 90 days to close a conventional commercial real estate loan and instead needs to close in a few weeks or will not offer the discount.

So say the property is really worth $2,000,000 but the seller has agreed to $1,500,000 a $500,000 discount. The buyer would get a commercial hard money loan at 60% of the purchase price or a loan amount of $900,000 and pay say 5% or $45,000 in fees to the commercial hard money lender. So the borrower would save $455,000 by taking advantage of the opportunity. In this case most borrower wouldn’t care (at least that much) about paying the commercial hard money lender their points because of the amount of money they make off the deal.

In general these type of scenario are much easier to close than the bankruptcy/company turn around/debt consolidation type situation. Many commercial hard money lenders no longer look at deals like this.

Author: Jeff Rauth
Article Source: EzineArticles.com
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Who knows the term hard money?

Hard money is private money lending, money you will receive from individuals that will loan you their money against your real estate, hard money lender is the bank and the bank will Loan you their money and put a lien against your real estate, the same with hard money lenders.

What is the difference between the hard money lender’s programs and the bank across the street?

1. Hard money lenders can help investors with large loan amounts, while banks will make it very difficult on the borrower to loan these large amount, so the loan would probably end up with an insurance company to loan the money and the requirements are high.

2. Hard money lenders can fund any hard money loan within a week, while for the banks it will take at least a month or even more.

3. Hard money lenders will ask for very little documentation, while the banks would ask for almost everything you have, taxes, income, assets, history of the property before and plans for after the purchase, business license, basically they will definitely want to see more from you to loan you some money.

4. Hard money lenders have guidelines but they can make exceptions without processing it through a whole underwriting team- while the bank need to go through different departments and underwriters and processors just to make an exception, and then the exception will not get excepted.

As you see to get a hard money loan is much easier then to get a loan from a bank because of the whole process, the banks are big companies and big companies have many different rules inside their companies, and to get an exception for these rules is almost impossible, and that is why many investors would rather go with a hard money lender.

So now you’re probably thinking what is the catch with the hard money lenders? OK, so let’s talk about all the reasons why you should not consider applying for a hard money loan:

1. Hard money lenders for their services will charge you 4 to 9 points on the loan- while the banks will charge you only 1 to 2 points. Example: If you have a loan amount of $1,000,000 and your hard money lender will charge you 5 points up front then you will pay $50,000- while the bank will charge you 2 percent which is $20,000, that is a bit difference but under different circumstances for some people it’s still a great deal.

2. Hard money lenders because of the fact that they will loan you money without showing your credit history and your income they will set the loans interest rate 9 percent-15 percent- while the banks will set your loans interest rate to 7 percent- 10 percent, again that is a huge difference if you’re thinking about it but for these people that want the hard money loans it’s still a great deal.

You have to understand that most investors or home buyers can not qualified today with banks for any type of Loan, hard money lenders can get you the deals you want (foreclosures, reo’s) without even thinking about showing all the unnecessary documentation, all you need to have is some money in your pocket if you’re purchasing, and if you’re refinancing then you need enough equity since the hard money lenders will probably go up to 65 percent at the most, also to find good hard money lenders it’s not so hard, it’s actually very easy because there are many private hard money lenders that are looking for real estate properties and notes to buy so they can make their points up frond and of course the high interest rate, if you will think about it, it’s much better then put the money in the bank.

Example: If a hard money lender put $1,000,000 in the bank and the bank will pay him 5 percent a year- while if he will loan the money to an investor that want to purchase a property or to refinance a property, he will charge his 5 points and he will get 15 percent interest rate on his money, that’s a big difference. Good luck to you all investors out there.

Author: Yanni A Raz
Article Source: EzineArticles.com
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Private lending is a world unto itself. Completely different from the snobby banking process we’re all used to. Fact is, using this fast and easy money to solve debt problems is a true “God send” if and when you need it.

While it can come with slightly higher costs, the benefits are through the roof. I’ll even show you how to use them to flip real estate for instant profits.

What exactly is a hard money lender?

First off, they’re people — with lots of money. They lend their money to people and businesses in return for a rate of interest. They always lend in the form of a mortgage against some type of residential or commercial property or raw land.

They are also called “hard equity investors” or “hard money lenders” or just “private investors”. The interest rate varies but is always higher than “banking” rates. But it’s also without “banking hassles”!

When you want a “hard money loan” you won’t care about the rate. You’ll only care about the money and the problems it solves.

Which is also what makes them unique. They solve problems.

How ugly-of-a-situation will they lend on?

high debts,

bad credit,

hard to prove income,

no credit,

unique property,

bankruptcy,

foreclosure,

commercial purchase or refinance loans,

consolidate bills,

bank turned you down, etc.

raw land

Need lots of money in three days? No problem.

They’ll lend to you when nobody else will. They’ll stop foreclosures and bankruptcies and they’ll give you money even if you have the worst credit score on the planet.

What’s unique about these “hard money lenders” is this.

1) They don’t ask for two dozen forms of ID, your DNA and the rights to your children. They only look at the value of the property or business they are lending money on. The property is the most important part of their decision. You, as a borrower, are not scrutinized. In short there has never been an easier loan to get approved. No tax returns, no bank statements no letters of explanation. No nit picking “stipulations”.

2) They, alone, make the decision to lend or not to lend. They don’t have to “run everything by” some wicked hook-nose underwriter. It’s usually just one person making the decision. And they make that decision quickly. Usually within a day or two.

So how much will they lend you?

Usually it’s about 65% of the property’s value. So if a home is worth $200,000 they’ll lend about $130,000. The loans are usually interest only mortgages (which keeps the payment lower) and they can close in about 3-14 days! That’s fast in mortgage lending.

So let’s say you lost your job and you’re behind on your mortgage by 4 months. You just got a “notice of default” in the mail and the lender is going to foreclose on your home. You have to save your home. No bank will touch this type of loan.

So, if you have enough “equity” a private lender will pay off your old loan – catching your payments up – giving you a chance to get back on your feet. Then when you’ve made a 12 or so payments on time with the private, you might qualify to go back to a lower rate mortgage lender for refinancing.

Here’s another example. Let’s say you have a credit score in the 400 range. Institutional banks won’t even talk to you, no matter how much equity you have. So you get a “hard equity loan” make some payments, get your credit cleaned up in the mean time, and then you refinance the loan to better rates. But the point is you get your money now! Not later.

Example #3. You just started a brand new business. Banks want 2 years of tax returns or proof you’ve been in business for 2 years. But you just started 6 months ago! No problem. A “hard money loan” will get you the cash you need to do whatever: fund your business, pay off debts, or anything you want.

With all of the crazy talk about a “mortgage meltdown” and foreclosures today, private money can be a true life saver for those in need.

Can you buy investment property with a hard money loan?

Yes. One client of mine, with great credit, only had to bring about $1,500 to closing and the private lender gave him enough money to buy the “fixer upper” and lent him the money to fix it up! The house has since tripled in value. That’s pure cold cash in the bank.

Everyone needs to know somebody with good access to private or “hard money” lenders. You never know when you’ll need one. Find a great deal on a house you want to flip? No problem, private investors. Buying a commercial building that’s worth double what you are paying for it? No problem: private investors.

What makes my hard money unique?

If there is one problem with private investors it is that they are very difficult to find. I’m not talking about the institutional lenders that “say” they are private hard money lenders. But the real private ‘hard money’ investors.

If you do a search on Google you’ll see tons of people claiming to be hard equity investors, but they are really just institutional banks looking to charge high rates to really good customers. And those sharks turn down more stuff than they approve, or the lend you so little money you can’t make the deal work. And some are really just looking to steal great deals right out from under unwary clients. They could care less about lending. It’s scary, but true.

The real private hard money lenders can’t be found online, yellow pages, or the newspaper. Most of them are reclusive, and to be blunt, a little eccentric. You just have to know them. You have to cultivate them. My private investors have taken me over 12 years to find.

When you do find them, you have to guard them like a pit-bull. That means protection from competitors, and it also means you don’t burn them. Ever.

That’s where the trust comes in. I never B.S. them or sugar coat things when presenting a deal. They’re extremely wary people, but if you treat them right and shoot straight, they come to trust your word. What this does is gets deals done that otherwise would have been turned down.

On top of all that, hard money lenders will lend on properties which are unusual. They each have their preferences, but if the equity is there, someone will “pony up” and get your money to you.

When you need a private investor, you’ll be glad you know one.

Author: Dan Dowling
Article Source: EzineArticles.com
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