Hard Money Loans

It would be an understatement to say that the decline in the real estate market changed the lending environment. Lenders who used to allow stated income loans no longer offer them, or they may claim to offer them but decline 99% of the stated loan submissions offered. This is extremely bad for investors who have made their incomes solely from real estate investing, or other self employed endeavors.

Primarily because when they do their taxes they have a lot of items to deduct from their income, and so their tax returns do not effect the true gross income that they earn. W2 employees do not have this problem, as they are qualified based on their full gross income and even if they do write off their incomes, the tax returns are hardly ever requested when W2′s are provided.

A good Residential Hard Money Lender, understands this is the case for full time real estate investors, and they will not have much taxable income on purpose at the end of the tax year. Even if tax returns are requested, its just to verify that the investor really does what he said on the application provided, and not to calculate debt to income ratios.

Another benefit to obtaining a Residential Hard Money Loan is that the loan is based on the After Repair Value, and not the Purchase Price. With a conventional lender, it doesn’t matter if you are buying at 10% of value; they would still require a certain percentage down payment on that purchase price. In other words, conventional lending methods ignore the fact that you are getting the property at a deep discount.

When you obtain a mortgage with a Residential Hard Money Lender you can rest assured that the After Repair Value (ARV) is being considered in the transaction. In a lot of cases the deep discount an investor is getting will allow room for the lender to roll in closing costs, rehab costs, etc… This decreases the amount of capital that an investor has to put into their projects, and therefore leaves more capital available so that he can do more deals.

If you have a real estate investment in mind, and are concerned with minimizing risk, and maximizing return on investment, you should consider utilizing a Residential Hard Money Lender. Its easier to qualify, and they are more flexible on the structure of a transaction.

Are you an investor looking to minimize risk, and maximize ROI by partnering with an aggressive Residential Hard Money Lender? Does including closing costs, rehab costs, and basing your loan on After Repair Value sound appealing?

If so, you owe it to yourself to see if you too can qualify for an Investor Rehab Loan by visiting this website: http://www.residential-hard-money-lender.com/

There are different standards and strategies that real estate investor’s use when evaluating properties. In order for us to get involved with a property, the following standards are judged for the worthiness of any rehab project:
“You should look for the worst house on a decent block”
1) Whether your strategy is to “flip” properties, or to hold them for their rental cash flow, it’s important to be able to draw potential buyers, or strong potential tenants, as quickly as possible. With this in mind, you should look at properties on streets that are maintained properly. This does not limit you to higher end homes. There are many “blue collar” areas that properly maintain the condition of their homes and yards. However, a street that has poorly maintained properties or many vacancies do not lend themselves to fast turn around sales or well suited tenants.
Always remember that this is an investment. You take on a large risk, and a lot of work as a rehabber. No matter how much loving care you put into your property, you can do nothing about the condition of your neighbor’s property.
2) Make certain that there is no structural damage to the property. This could be a fatal blow to your investment!
“You make your money when you buy a property, not when you sell it!”
Purchasing Formula
There are many formulas used for the successful purchase of a rehab project. It’s important to use one. There must always be a comfortable cushion between the purchase price and the selling price of investment property. This cushion price will help you achieve a successful investment, even if you have repair cost over-runs, or hold on to the property longer than you had anticipated. Remember, every day that the property is not sold or rented comes right off your bottom line. The interest, taxes, insurance, and utility bills compound each day. Buying the property at the right price will protect you from Murphy’s Law.
Our Funding formula:
1) Establish an after repair value for your property.
(Get “area comps” and view each one. Pick out the property that has a street that is most similar to your house’s street, and a structure that is closest to your house’s structure, and then compare the square footage, amount of bedrooms and bathrooms that are all listed on the “comps.” This will help establish a real fair market value for your property).

2) Multiply the ARV x .65 (After Repair Value)
(This will give you 65% of the ARV).
3) Establish a comprehensive and accurate list of repairs that you plan to do to the property, and estimate the costs for each repair.
(This is important. If you are knowledgeable and experienced in doing repair work, you may not need help. If you are not experienced or skilled in this, find someone who is and have them draw up a plan. Even if it costs you a little money to get them out there, this could save you thousands of dollars).
4) Subtract the cost of repairs from the 65% value of the ARV. (After Repair Value) This should be the maximum price that you pay for the property! This is a conservative formula, and it usually works well. Remember, anyone can buy a property at close to fair market value, but with your costs and risks, you must do better!
Written by Jim Olivero

There is the always the “cost associated” with the hard money loan. In comparison to a traditional business loan, a hard money loan will be much more costly. You can expect to pay a fair amount more in interest rate in exchange for having the money faster. Consider the higher interest rate as the cost you pay for the convenience. As an addition, up-front fees will add to the cost of the loan overall and it may do so considerably. This can end up making the loan financially debilitating in the long run.

Extensions are hard to get on hard money loans. If you get to the end of your interest term and need an extension, you may not get it. In that case, the entire balance of your loan will be due immediately. If you do not have the money, it gets even worse for you. Most hard money loans will foreclose on your property much faster than a commercial lender. Essentially, if you don’t pay you could be out of your property as fast as the law will allow. Thus, there are considerable risks when taking on a hard money loan.

Lastly, a hard money loan will likely have a “prepayment penalty”. In other words, paying off the loan early can often cost you as much as 3 months of interest. Even if you don’t think you will pay off early, it is nice to know you can. With a hard money loan, the option to pay off the loan early without considerable consequences is just not there in most cases. In the end, the cons linked with a hard money loan must be fully considered long before you decide to take on the awesome responsibility of such a loan.

For more inquiries on how to saveyourself in debt you can go to totaldebtservices.com. Its a financial company that offers free debt consultation across the United States.

Foreclosure rates are on the increase all over the country, causing alarm. The market has also seen an increase in defaults and higher loan-to-value ratios are making it more difficult than ever before for borrowers to find refinancing. However, no matter how bleak things seem, there is still an alternative to foreclosure in the form of hard-money loans. Also referred to as bridge loans, since they provide temporary financing for credit repair and property seasoning purposes, hard money loans can help to stop a foreclosure.

Homeowners who have been out of work and have now found a job may still be unable to meet the full payment demanded by the bank. But, due to improved circumstances, they will be able to make their regular monthly payments. A home foreclosure at this stage would ruin their credit rating and their current ability to make payments, seems like an unnecessary and extreme step. However, the lender may not be willing to accept anything less than the payment in full, leaving the homeowner with very few options. This is a typical situation where a hard money loan can be of help.

Depending on the amount of equity in the house and its current worth, some homeowners can qualify for a hard money loan. Such loans are generally offered by specific lenders and in spite of no special costs being involved, these lenders can close on a loan quite quickly. Hard money loans are available from groups of private investors, pooling their money to invest in real estate. These loans are used when the borrower has limited time left to close a loan. Alternatively, they can be used when the borrower does not want to give out their credit history or when they plan to keep the property only for a limited period of time or when there is already a plan to refinance in a short while after closing.

Real estate is the collateral asset in hard money loans and the lender assumes a lien on the property. The size of the loan, its rate and the term is based on the equity, the marketability of the property and the financial standing of the borrower can be used quickly by homeowners running out of time and options, to stop a foreclosure. There are myths about these loans, based on the impression that they have soaring interest rates and low loan-to-value ratios. In truth, hard money loans do carry a higher interest rate, but they are generally in the 12% range rather than the 18% range. The key issue is the valuation of the property. One of the methods for determining value is an appraisal by an objective third party with no connection whatsoever to the transaction. An accurate valuation of the market purchase price must be extensive and include relevant information about the property. Most such reports also feature a comparison with similar properties and an overview of the local real estate market, along with other relevant issues.

Homeowners who qualify for these loans may have to pay a premium to get this new loan to stop a foreclosure in progress. Hard money lenders can charge 4 to 5 points of the loan as their fee. Hard money loans are a perfectly viable solution for homeowners in foreclosure who are able to meet the requirements. Although expensive, these loans provide foreclosure victims a short term solution, giving them a chance to keep their homes. It allows them to rebuild their payment history.

A residential hard money loan is a kind of loan in which a borrower gets funds based on the value of a specific commercial or residential real estate. The term hard money refers to the difficulties in acquiring a loan. Hard money loans offer high interest rates and lower loan-to-value ratios, as there is no government institution that backs the lender. The loans are given against the value of real estate collateral.

Residential hard money loans are loans given by private lenders on the basis of the value of the asset or property as opposed to the traditional banking criteria of credit scores, tax returns, and income statements of the borrower. Residential hard-money loans are temporary bridge loans that are provided for acquisitions, refinancing, foreclosures and people who file for bankruptcy. The interest rates for these loans are high, but it is cheaper than taking on a financial partner or filing for bankruptcy.

In general, hard money loans offer interest rates and points that are 50-100% higher than traditional bank loans. This has led to the impression that they are tough to repay. However, hard money loans are considered to be beneficial for people looking for sources to help them get loans, for example, to renovate residential property before selling or renting it.

The hard money lenders usually consider income-producing properties such as apartments, retail or shopping centers, industrial, office buildings, hotels, motels, medical institutions, and restaurants. They also provide loans for non-income producing activities such as land acquisition, development and construction, bank workouts, foreclosures and bankruptcies.

Most private investors look for a safe and secure investment with a return that is better than what they will receive from the bank. As residential hard money loans are secured by a property with usually 30% – 50% equity, the investor is well protected and receives the benefit of the higher interest rate return.

Author: Thomas Morva
Article Source: EzineArticles.com
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We all know banks are not lending money.

We also know that the few opportunities that may exist from borrowing are made much  more difficult by the banks requiring better credit than ever, and many of you have suffered credit hits because of the current downturn, reduced revenues and increased overhead expenses.  Thus, it is even harder to get a loan.

This is a problem.

Aside from normal operating requirements requiring lines of credit, and the desire to make acquisitions of many sorts, there is also a great need for capital to fund workouts. Workouts reduce debt paying small amounts in consideration of large reductions of debt. But you must be able to support the cash requirement or it cannot be done.

Frequently this becomes a critical issue as a workout may mean you remain financially alive so the capital required to fund a workout is critical to your emergence and survival.
So what does one do when loans are generally unavailable and with an upside down situation even with good credit banks are reluctant to lend to you.

The answer, hard money. Non bank lending, private lending, high points, high interest, low loan to value ratio but flexible terms.
Currently we are arranging a hard money loan with 10 points and 14 – 16% interest…Wow! Who would believe this? Not all hard money lenders are this steep but this situation is.

Why would someone do this? Simple, the nest savings will be many hundreds of thousands of dollars, about a million, and the actual cost of the loan for the first year is about $50,000. Steep? Yes. But compared to saving his business and reducing his debt by a million, the $50,000 is a bargain. It facilitated huge gain and survival, all for a mere $50,000.

This here is a place for hard money even at its hardest. Especially when supporting a workout…

Call us if this issue is holding you back…There is an answer.

Call Norm at 413-584-2581…he will arrange a no obligation teleconference for us to discuss your options.

According to the Mortgage Bankers Association, nearly a quarter of a million home owners face foreclosures every three months, across America.

Sixty percent of the effected families wish that they knew better about the mortgage they were dealing with. Still, it’s never too late to understand your options in case of a foreclosure.

Hard Money Loans

Hector Milla Editor of the “Best Loan Modification Companies” website — http://www.BestLoanModificationCompanies.com — pointed out;

“…Typically the best option that most are unaware of is getting a hard loan. To many, it is possibly the simplest option to stop foreclosure and requisite. These hard money loans are never offered by the banks or financial institutions. In order to avail these, you will have to look in your local area for private lenders. A legal expert can easily locate such lenders but nowadays nearly every community has at least one private lender who specializes in hard money loans…”

Terms

The private lenders will provide up to 60 to 70 percent of the amount as collateral against the value of your home. A major drawback is that the interest rate will be on a higher side ranging from 11 to 19 percent, in most cases. Furthermore, to safeguard the interest of a lender, the appraised value of the home will be assessed lower than its original market value.

Nevertheless, getting a hard loan is sometimes very beneficial as the home owners not only get the financial help they require but it seldom entails any income or credit evaluation.

“…Before you embark on a journey to financial freedom with hard loans, make sure to consult an attorney. As hard loans are mostly unregulated, an attorney can easily assess the terms of the lender and protect you from any undue claims…” H. Milla added.

Further information about how to get professional assistance with a mortgage loan modification by http://www.BestLoanModificationCompanies.com

A hard money loan is a type of asset-based loan, which is usually provided by a private lender, oftentimes an individual.

Terms vary between lenders, are usually more specific and strict than with conventional lenders, and they often come with high interest rates. Typically, a maximum of 70% of the home’s market value will be loaned by the hard money lender.

Hector Milla Editor of the “Best Mortgage Loan Modification” website — http://www.BestMortgageLoanModification.net — pointed out;

“…It is possible to refinance a hard money loan into a more traditional mortgage on a foreclosure or any other property; however, the borrower will want to fully research the terms of both the hard money loan and refinancing loan. He/She will also want to make sure they qualify for the refinancing that they want…”

Qualifying for hard money may be easier in certain aspects(often credit score is not considered) than with typical lending institutions, so this is an important point to consider.

If the deal is not structured right, there may be seasoning issues with the institution when the decision to refinance is made. Seasoning is a term that refers to the length of time that the property has been owned by the seller. Different types of loans have different seasoning requirements, and these will need to be fully understood before setting up the deal.

Many hard money lenders will not issue a loan on a home that will be the borrower’s primary residence, so this will also need to be considered.

The new value of the home at the time of refinancing will need to be verified, and any repair or fix-up costs will need to be validated through receipts and other paperwork. The investor may also need to wait from 6-12 months to refinance depending on seasoning issues.

“…In conclusion, it is possible for a foreclosure property to be refinanced from a hard money loan originally used to purchase the home –or other property– but this will depend on several factors: the terms of the original loan, the terms of the new refinanced loan, and whether or not the buyer qualifies for both loans. This is not a situation to jump into without thorough and proper research…” H. Milla added.

Further information about how to get professional assistance with a mortgage loan modification by visiting; http://www.BestMortgageLoanModification.net

Hard money loans are specialty loan products, only taken on by investors who are willing to invest in high risk loans.

The loan to value ratios are low, the interest rates are higher, the points or fees are typically much larger than other mortgage loans, and these types of loans are often due and payable sooner.

Natalia Osorio Editor of the “Loan Modification Foreclosure” website — http://www.LoanModificationForeclosures.com — pointed out;

“…The financing criteria for a hard money loan is often based exclusively on the value of the collateral which is the property being financed, and no or very little consideration is given to a borrower’s credit. This means that even a person in foreclosure whose credit and credit score has severely declined can qualify for this type of loan if there is a sufficient amount of equity in their property that reduces the investor’s risk. The loan to value is 65% or less. This means that if your home has a value of $350,000, the maximum loan amount would be $227,500 which is 65% of $350,000. Hard money lenders really prefer making loans on properties with a loan to value of 50% or less…”

Interest rates on hard money loan to stop foreclosure immediately will be substantially higher than other mortgage loans, often 12% or even greater. Often they are interest only loans so that none of the payments apply to the principle.

In addition, a hard money loan will charge the borrower the maximum amount of points allowed under mortgage law regulations. So expect to pay at least six points or six percent of the loan amount to acquire this financing. Usually the six points plus all other closing costs are included in the total amount of the loan, so you will need some wiggle room in the value of your collateral to cover the loan closing costs as well.

These loans are often amortized over 30 years, but are due and payable within eighteen months to five years.

“…In addition, if you own other property, you are an especially good candidate for a hard money loan to stop foreclosure immediately because these lenders are open to cross collateralizing your other property. This means that other properties of yours would be encumbered in the hard money loan as well…” N. Osorio added.

Because of the small number of qualifying features, as well as the independent nature of these investors, hard money loans can close very quickly and can be excellent to stop a foreclosure.

Further information about how to get professional assistance with a mortgage loan modification by http://www.LoanModificationForeclosures.com

Hard money loans are a specific type of asset-based loans. In this type of loan, a borrower receives funds that are secured by the value of a parcel of real estate. These loans are paid back with a higher interest rate than conventional commercial or residential property loans. This type of loan is rarely, if ever, issued by a commercial bank or other deposit institution.

Hard money loans are very similar to bridge loans. Bridge loans typically have similar criteria for lending. They also have similar costs to the borrower. The primary difference between a hard money commercial loan and a bridge loan is that a bridge loan frequently refers to a commercial property or investment property that is in transition. The property may not fully qualify for traditional financing yet. Hard money commercial loans refer not only to asset-based loans with a high interest rate but also loans for a financial situation that is possible distressed. Examples of this include cases where someone is arrears on an existing mortgage or where bankruptcy and foreclosure proceedings are already in process.

Hard money mortgages, both commercial and residential, are made by private investors. They typically make loans only in their local areas. The credit score of the borrower is not important because the loan is secured by the value of the collateral property. The maximum loan to value ratio is 65-70%. This means that if a piece of property is worth $100,000, the lender would give the borrower $65,000 to $70,000. This low LTV (loan-to-value) ratio gives the lender added security in the event that the borrower cannot pay and the lender has to foreclose on the property.

Commercial hard money lender programs are similar to traditional hard money loans in terms of the LTV requirements and interest rates. A commercial hard money lender is typically a strong financial institution with the deposits and abilities to make discretionary decisions on loans that are non-conforming. These borrowers do not conform to the standards of Fannie Mae, Freddie Mac, or other residential conforming credit guidelines. Since it’s a commercial property in question, the loan does not generally conform to a standard commercial loan guideline either.

Traditional commercial hard money loans are very high risk and have a higher than average default rate. Just like in a normal commercial loan, when a property owner defaults on a commercial hard money loan, he or she can potentially lose the property to foreclosure.

For more information on hard money lending, please visit http://www.pitbullmortgageschool.com.

Author: Joseph Devine
Article Source: EzineArticles.com
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