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.

Thanks to hard money lenders, it is easier for cash-strapped real estate investors to complete good deals and make big profits. These non-traditional financiers are great alternatives to institutionalized lending companies, such as banks, mortgage companies, and credit unions. It is because they can provide financing to an investor even if the latter has a poor credit rating.

The reason why these private lenders are not concerned with a borrower’s credit record is that the type of financing they are offering, which is called hard money loans, are asset-based. To verify a loan’s eligibility, hard money lenders assess the after repair value of a property for which the loan is being made. If they think that the property has a great potential and can fetch a good price once it has been repaired and renovated, then they are likely to approve the loan application.

If you are having trouble securing financing for your investment properties, they you should consider obtaining hard money loans. Listed below are some of the perks of borrowing money from hard money lenders instead of seeking the assistance of traditional lenders:

Lenders of hard money can process a loan application in just a matter of days, with some of them accomplishing such a task within 24 hours. Thus, you don’t have to wait for weeks or months to determine the outcome of your application Because your loan application can be processed in a flash, you can get the funds that you need as soon as possible. Unlike their traditional counterparts, lenders of hard money are easier to deal with. You don’t have to wait at long lines just to talk to the person in charge. You also don’t have to negotiate with a tough processing panel that will make you wait for months only to reject your application. You don’t have to submit reams of paperwork and tons of documents as most hard money lenders require only the appraisal of the property to verify a loan’s eligibility. Obtaining hard money loans would be mostly beneficial for rehabbers as lenders of hard money are willing to provide coverage for the property’s repairs. By using hard money to finance a project, you can make huge profits without spending money from your own pockets.

Terms, however, vary from one hard money lender to another and interest rates can be significantly higher than those in traditional loans. Therefore, to avoid confusion on your part, it would be best to educate yourself about the nuts and bolts of hard money lending.

So if you want to enhance your knowledge of hard money lending and real estate investing, log on to www.Rehab-Real-Estate.com.

Many business borrowers do not prepare adequately for the commercial mortgage business loan problems that are common in most business financing scenarios. By anticipating typical commercial loan difficulties, business owners are more likely to avoid potentially disastrous business finance consequences.

With rapidly deteriorating financing for residential investment property, overcoming business loan and commercial mortgage problems is even more important. This summary provides an introduction to four critical commercial loan factors and should assist commercial borrowers to better anticipate key business financing difficulties.

It is not unusual to find that business investment lenders and business loan brokers are not as forward-looking about business financing and investing difficulties as most borrowers would expect, and I have published another article about commercial lenders to avoid. The focus here is on four typical commercial mortgage loan and SBA business loan difficulties often overlooked by commercial lenders and borrowers.

Commercial borrowers should be prepared for commercial loan scenarios that involve unexpected business financing problems. With business financing there are several key commercial mortgage problems which should be avoided. Business loan problems are more serious and prevalent than many borrowers would imagine.

Some of these commercial mortgage business loan difficulties might be unavoidable, but in most cases these business financing and SBA loan challenges can be successfully overcome. Commercial borrowers will be poised to take proper corrective action if they are aware of common commercial loan difficulties.

Avoidable Commercial Real Estate Investment Property Financing Scenario Number One: Use of secondary business financing -

Many commercial borrowers want the flexibility to use subordinated debt (a seller second or other secondary financing) in order to acquire a commercial property or business opportunity investment with a smaller down payment. Many forms of business investing will not permit a seller second or other forms of subordinated debt. With a commercial loan via non-traditional business lenders, a commercial borrower can use subordinate business financing (including seller seconds) to reduce the amount of their down payment.

Commercial Mortgage Example Number Two: Sourcing-seasoning assets and seasoning of ownership -

Some commercial lenders will require borrowers to document the source of the down payment for a purchase (sourcing). Many business lenders require borrowers to document where down payment money is coming from, often for up to 12 months in order to provide seasoning confirmation. Ownership seasoning is determined by establishing a minimum period for ownership prior to being eligible for refinancing.

Such a problem will probably not deter all borrowers. When it does apply, business borrowers should insist on a lender without seasoning and sourcing requirements.

Business Financing Example Number Three: Commercial mortgage recall terms -

Business loan recall conditions will often allow the commercial lender to force the borrower to repay their loan before the normal loan expiration. If a commercial loan agreement does not include recall terms, such a possibility is not of immediate concern to a borrower.

Commercial lenders will routinely include recall conditions in a business loan agreement. The provisions which will prompt a recall will vary and typically include annual business lender monitoring of financial statements, tax returns and credit history. Without agreed income, tax returns and credit standards, the lender can choose to require the borrower to pay off the commercial loan within a very short period of time.

Contingency Plans for Business Finance Recalls: What to do about a commercial loan recall -

To avoid an unanticipated recall scenario, commercial borrowers would be wise to consider only commercial loans which do not have recall terms. For commercial borrowers who have recall provisions in their business financing agreement, it will be equally wise to consider refinancing their business loan or commercial mortgage before a recall occurs so that refinancing is accomplished when it is most appropriate for the borrower.

When borrowers receive a business financing recall, they must quickly obtain refinancing assistance. When reviewing commercial loan choices for refinancing, borrowers should attempt to exclude potential lenders that require recall terms.

Business Loan Example Number Four: Business financing that needs a long-term commercial loan -

Is long-term investing and financing really possible for a business loan? Some business investment lenders will only offer 5 years (or less) before commercial real estate financing will expire with a balloon payment due.

There are commercial mortgage programs which can provide long-term financing, even though many lenders will only offer shorter-term options for investment business financing. Longer-term commercial real estate financing will often be the critical difference that facilitates a successful business investment because a new business loan will not be required for many years and commercial loan payments will also be reduced.

Additional Commercial Loan Problems and Solutions -

Unfortunately commercial borrowers will frequently encounter commercial mortgage business loan problems similar to those described here. To better prepare for this, an advisable approach is to explore business financing resources that will facilitate a better understanding of complex commercial loan issues. The Commercial Real Estate Loan Guide and The Working Capital Management Guide are two examples of business finance resources that will provide possible solutions for many difficult commercial financing situations.

photo credit: stevendamron

I interview real estate investors for my website and recently I came across a number of investors who teach about using private money to purchase real estate. However, if you would have asked me one (1) year ago about the difference between private money and hard money I would not have been able to tell you anything. The difference however is very critical.

Broken down into its simplest form the main difference is with private money you decide the terms of use and with hard money the lender decides the terms of use. Now this very basic difference has a lot of impact on your real estate investing business. One type of money is not necessarily better than the other but you should in fact no the difference.

Where does the money come from?

In both scenarios you are going to receive the money from an outside investor. There are several ways to discover these investors from holding luncheons to running ads in the local paper. The investors know that real estate will offer a higher return than the market so they are inclined to give you some dollar amount in exchange for a percentage of return. Read the rest of this entry »

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
Provided by: Cellphone news