For a real estate investors, it is beneficial to know what hard money loans are, and where you may use them.
Real estate investors require cash to secure the property they are interested in. However, having cash on hand all the time isn’t possible. Moreover, big financial institutions, such as banks have stringent terms and conditions that may be difficult to follow for a real estate investor.
This is where hard money loans come in! if you want to know more about them and where they can be used, just keep on scrolling.
What are Hard Money Loans?
Hard money loans are for short-term financing and usually have a high interest rate. The greatest thing about these loans is that they are approved fairly quickly and are not based on the borrower’s credit score or income. Instead, these loans are based on the real estate the borrower is buying or an existing property that they already have equity in.
Hard money loans usually have a twelve-month term, requiring monthly payments of interest, or interest plus principal amount, followed by a balloon payment at the end of the term.
Where Should You Use Hard Money Loans?
It is worth noting here that hard money loans are not for all deals. In case you’re about to purchase a primary residence, have good credit and income history, and there aren’t any other issues, such as foreclosure or short sale, a conventional loan from a bank may be best for it. You should go for hard money loans when you need the money in a short period of time and banks are not an option.
Hard money loans are perfect for these situations:
- When you’re doing fix and flips
- When you need loans for land
- When you need a loan for a construction project
- When the borrower has low credit score
- When a real estate investor needs funds to secure a property quickly
In all of these situations, it is better to have quick loans for a short period of time.
Wrapping Up
In this article, we discussed what hard money loans are and where they can be used. These loans are ideal when the borrower needs quick funds, has credit issues, needs short-term loans, or needs to act quickly to secure a real estate.
In case you’re looking for hard money loans Dallas, we highly recommend getting in touch with capital Concepts for their expertise and experience in hard money loans.
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