Hard money is borrowing money without conventional mortgage lenders. These loans come from investors or individuals who lend money depending on the property used as collateral. When you need loans quickly, or at a time when traditional lenders do not approve any loan, hard money loans Houston is the only option.
Hard money loans
Hard money loans are short-term loans secured by land. These loans are funded by a fund of investors or private investors against traditional lenders including credit unions or banks. The loan terms are generally 12 months, however, the term can be extended to 2-5 years.
The amount of hard money loan is based primarily on the property’s value. This property might be the property owned by the borrower and it might be the property that the borrower is buying. Hard money lenders are not concerned with the borrower’s credit. Borrowers who cannot obtain traditional financing because of a short sale or a foreclosure can get hard money loans if there is adequate equity in a property being used as collateral.
Pros of Hard Money Loans
Hard money loans are expensive, but they may prove to be profitable if used by certain borrowers due to the following reasons:
- Speed
As lenders are primarily focused on collateral, these loans can be closed quickly compared to traditional loans. Lenders do not spend time going through the loan application process in detail including reviewing the bank statements, verifying income, and others. After you have established your relationship with hard money lenders, the loan approval process moves quickly and you can close the deal quickly.
- Flexible
Hard money loans are more flexible than traditional bank loans. Here, the lenders do not use any standard underwriting process, rather they evaluate all deals separately. They tweak things such as repayment schedules according to the needs of borrowers.
- Approval
One important factor of this kind of loan is collateral. When you purchase an investment property, lenders shall lend as much as the worth of the property. The lenders care about the property’s value. The negative items in a credit report are less important for the lenders. Many hard money loan lenders keep their (LTV) loan-to-value ratios quite low. The maximum LTV ratio is 50% -70%. As the ratios are low, lenders can sell the property quickly.
- Negotiable
Hard money lenders can be negotiated with but this is the case with bank loans.
Deals for which hard money loans should be used
Hard money loans might not be appropriate regarding all deals. When you buy a primary residence that has good credit and income history, and moreover, there is not any issue including foreclosure or a short-sale then traditional financing through banks is a good way though the loan approval process is a lengthy one. Hard money is a good financing source when you need a loan for a short time period and banks are not a good option.
These loans are ideal for situations like land loans, fix and flips if buyers have credit issues, and construction loans., and when real investors have to act quickly.
Hard money loans with bad credit
Hard money lenders do not need credit documentation regarding your financial standing. These lenders do not ask for credit reports and this is the reason why hard money loans Houston are the best people for those borrowers who have low credit scores.
So, when you need hard money loans, get connected with hard money lenders. Find out in your local area about the real estate investors or real estate agents who are a good source of hard money loan providers. Reach out to these people and discuss your needs and get loans quickly.
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