What is a hard money loan?
A hard money loan is very much like a conventional loan from the Big Banks, but with easier qualifying approval standards for income, credit and property conditions. Typically interest rates are higher, have interest-only payments and shorter loan terms. Interest rates for most hard money loans range from 7% to 12% and have loan terms between 1-5 years. Hard money loans can be closed much faster than loans from the Big Banks. Borrowers FAQs
Why would someone consider applying for a hard money loan?
- Credit Issues
- Income Issues
- Property Conditions
- Cash needed FAST
If a borrower has credit, income or subject property challenges that are not acceptable to the big banks, then a residential, commercial, fix and flip, and probate hard money loan are possible options when financing is needed. In addition, when funds are needed fast for a possible business or investment opportunity, and time is of the essence, then a hard money loan can provide needed funds much faster than traditional bank financing.
Does the borrower have to own real estate to secure a hard money loan?
Yes, since hard money loans are secured by deeds of trusts that are recorded against real estate.
What types of property do I have to own?
Most any property can used to obtain a hard money loan. Hard money lending standards have different qualifying requirements for each property category. Borrowers FAQs
What is the interest rate for a hard money loan?
Most hard money loans have interest rates that range from 7% to 12% depending on 1) if the loan is a 1st or 2nd trust deed, 2) the borrower’s credit and income, and 3) the property’s condition and location.
What are the costs of a hard money loan?
Hard money loans have just about the same closing cost ranges that the big banks have with the exception of loan origination points that often range from 1-3 points. One point is equal to 1% of the loan amount.
What are the qualifying requirements?
Federal and state laws require that all lenders, including hard money lenders, verify the borrower’s “ability to pay” for all real estate loans. Since hard money loans are typically funded and arranged on income properties, the monthly rental income is looked at to provide the income to pay any proposed hard money loan.
What are the credit requirements?
Hard money loans can be obtained with most any FICO credit score since there are no specific minimum credit requirements. Since all hard money loans are not the same, the better the credit the better the interest rate. Borrowers FAQs