Hard Money Loans

If you’re one of the people struggling to keep their business or their houses alive amid the many financial obstacles, then you might want to consider hard money loans.

One of the many good things about this is that a borrower’s credit record does not have that much effect on the loan. The loan itself does not depend on the capability of the borrower to pay but on the property’s worth. If the lender sees that the property has a possibility to sell, the loan is good to go.

Traditional lending institutions such as banks do not give loans like this since the risks are pretty high. This is one reason why hard money lenders charge a higher interest rate than that of a bank. They trust the property’s potential and not the borrower’s capability to pay, thus makes the whole process riskier.
Another good thing about this is it doesn’t take long to close the deal. After the lender has determined the property’s value, the process won’t take long. Usually, conventional loans take about three months to get approved, but not with hard money loans. It is called fast cash because it may only take weeks or days to be approved and released.

Investors who are on the flipping houses and rehabbing business can take advantage of this benefit. Real estate investing has never been this easy.
However, they are not the only ones who can enjoy the benefits of this loan. Obtaining hard money loan can give them more time to either sell the property or pay off their mortgage. In a case like this, a borrower’s income and capability to pay off the loan may be taken into consideration.

To successfully get and use a hard money loan, nothing beats a diligent research. Identify if the loan is fit for your needs. Make use of your time wisely in looking for the right hard money lender. Search real estate investing associations and ask for referrals. The internet is also a useful tool in searching for information and lenders.

One site that can be helpful in your search is www.RehabHardMoney.com.

Author: Daniel V. Mc Grey
Article Source: EzineArticles.com
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Hard money is a way to secure property in a short period of time then refinance into conventional finance and can provide an alternative source of financing for real estate investors. Conventional institutional lenders will not finance hard, hairy loans and on the other side equity investors demand very high returns and/or shares of profits.

Investors who borrow hard money understand that this type of loan is more expensive than conventional loans. A hard money borrower perceives that the loan’s value extends beyond its cost. Investor rehab loans are particularly easy to find with a number of competitors but at the same time you should watch out for the hard money lenders that are also wholesalers.

The Lenders

Lenders of so-called “hard money” are becoming more common and more accessible: Perform a search for “Las Vegas hard money lenders” and you will discover many results, many for the state of Nevada, specifically. There are even private lenders based online, at your convenience.

Lenders have much stricter criteria these days, and for a good reason. In today’s society, the laws favor consumers, not banks. So lenders turn to look at whether or not the applicant is worth the financing and if the business plan is practical. They can scroll through the list of entrepreneurs and make a selection based on the person they wish to lend money. Most loans when approved are made via credit card or PayPal.

Most lenders ask borrowers to pay a minimum of five percent upfront deposits, as a guarantee. The greater amount of deposit will shrink your interest rates and mortgage payments under most circumstances. Lenders want the loan to be current, not to have to complete a foreclosure. But can you make up the defaulted amount over a period of months?

The Borrowers

Most people apply for hard money loans when they have credit problems, are in default, have had a foreclosure or bankruptcy, have been recently unemployed, or for some reason cannot provide proof of income.

Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding. If you feel you have been the victim of unfair practices, contact your state’s attorney general office or the office of the state in which the lender operates.

Some borrowers love to use hard money lenders on all real estate deals. Borrowers of hard money loans qualify based on the value of their property more so than the quality of their credit history. However, there is a market out there that hard money lenders cannot fund. So make sure you do your research right before taking on a hard money loans.

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Most seasoned real estate investors face situations where they require more money than what the traditional lenders will lend, and here is where real estate investing with hard money loans given by the specialized lenders is useful.

The hard money lenders are actually private money lenders who provide money for a short term. These loans carry a strict repayment schedule. It is given the name as hard money on account of its strict nature. The rates of interest of such loans are also higher than the market rates, and the fees charged upfront, range between 4 to 10 points.

The money lenders of hard money give the investors the access to the capital that is asset based, wherein the loan amount is secured by way of a collateral security. The rate of interest ranges between 14 to 18 percent annually and the term of the loan is normally six to twelve months.

Along with the property as collateral security, the hard money lender requires can require credit reports and well as documented experience in previous deals you have done. The lenders indulge in inspecting the property and making appraisals, before approving the loans.

The lenders of hard money study the intent of the investment on part of the investors, the strategy of exit that is adopted, the information of the property that is provided such as the residential or commercial nature of the property and also check the credit ratio of the concerned borrower. The financial strengths of the borrowers play a vital role in securing the loan.

The fees that are charged are dependant on the risk factors and the quality of the real estate deal. The plans of using the money set by the investors are also carefully studied by the hard money lenders. Hence, it is recommended that the borrowers provide a proper business plan for securing the hard money loans. They need to convince the lenders about the low risk nature of the concerned investments.

The conditions and the terms of approving real estate investing with hard money loans, vary for different lenders. The investors have to find the perfect lenders suitable for them, and ensure that they keep a good relationship with them.

Such types of loans are useful for procuring or purchasing properties. They are also useful for the buyers having low finances, against those that are required for the project, but have good fixed incomes.

Some of the lenders of hard money have choices regarding the type of the real estate investments, such as rehabbing houses, purchasing houses and the options of lease purchasing.

It is easy to lose a potential deal for lack of finances and hence, maintaining proper relations with the hard money lenders is a priority for the investors. The support of such money lenders is very important for the investors if they want to complete the real estate project in a proper manner. Good relations with lenders are a blessing in disguise for the investors.

Charles W. Moore, a U.S. Army Veteran began Real Estate Investing in 2001. He’s a Successful Investor, and Author of, “Million Dollar Rent To Own Real Estate Secrets Exposed.” Get his Free Report on Rent To Own Real Estate Investing [http://www.Rent2OwnExposed.com] at: [http://www.Rent2OwnExposed.com] – Learn Real Estate Investing, Stocks Markets and Internet Marketing, visit: http://www.REIeBooks.com

Author: Charles W. Moore
Article Source: EzineArticles.com
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No one offers instant hard money loans, but compared to the time it takes to obtain conventional financing, it may seem like an “instant”. For real estate projects, such as rehabbing, it will take a commercial bank at least a month to hand you a check, usually longer. Private lenders can get you your money in half that time.

Two weeks is the average turn around time for private lenders. That’s perfect timing if you are about to bid on a foreclosure or an estate sale. That’s about how long the trustees usually give you to pay the balance. Bankers may be keeping longer hours, but they still don’t work that fast and with the economy the way that it is right now, they are denying as many loans as they approve. It often takes two weeks just to get a “sorry we can’t help you”.

There are no instant funding hard money loans, because anytime that you want to borrow a large amount of money, a process has to be completed. Credit card companies might offer instant approval for a few thousand dollars, but that approval is based solely on your credit score. Your credit score alone is not enough to convince a lender that you are a good risk and a few thousand dollars will not help you buy or build a house.

In addition to your creditworthiness, hard money lenders will want to look at your income, your employment history and your experience. They will also want to know that you have a plan. They say that no one plans to fail, but many fail to plan. In the world of real estate investing and rehabbing, planning is extremely important. If you skip the background work, then you may end up with a property that you cannot sell, rent or repair and of course, that means that you probably cannot repay the loan. If you get everything lined up properly, there should be no need for instant hard money loans.

Rehabbers, for example, start by looking for a property that “needs work”. They check out the house, check out the neighborhood, determine what repairs will cost, determine what the “after repair value” will be and then make an offer to the seller. A small deposit will usually be enough to hold the property for a few days. If you get approval from the right financer, you can get a proof of funds letter, so the seller has no reason to look elsewhere for a buyer. If you get pre-approval, you can close the deal within two weeks, so you won’t lose a motivated seller. So, while there may be no such thing as instant hard money loans, there are ways to get funding fast.

Remember, if someone promises you instant funding hard money loans, they’re probably not telling you the truth. You can get money relatively quickly, but it will always take at least a couple of weeks.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Lending, a comprehensive resource for those looking to secure funding for real estate projects.

Author: James Whitmore
Article Source: EzineArticles.com
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What is a Hard Money Loan?

Hard money loans are a specialized type of real estate backed loans. Hard money lenders or private lenders provide short-term loans based on the value of real estate that has been collateralized for the loan.

Hard money loans typically have a much higher interest rate than bank loans because they fund deals that do not conform to bank standards and have higher risks. Hard money loans are more expensive than traditional loans because they are not based upon traditional credit guidelines. Hard money lenders may not require the income verification, credit score, etc. that typical lenders do, but their interest rate and points are higher.

“Points” on a hard money loan vary widely, some lenders may charge 1 to 3 points, while other lenders may charge up to 7 or 8 points. Some lenders base the points charged on the rehab experience of the borrower with regular clients getting reduced points the more business they do.

New rehabbers should not do more than 1 project at a time, especially in this economy. You don’t want to be stuck with a couple of houses when you do not have the finances to maintain them until they are sold. Also, as a new rehabber, you should get yourself registered (qualified) with a Hard Money Lender first so you can act fast when you find a house to rehab. You will able to get a “proof of funds” letter quickly from your Hard Money Lender to be qualified as a cash buyer. It is important to be a cash buyer since the sellers of foreclosed or distressed properties want fast deals. In fact, most ads or MLS listings require a pre-approved buyer and request the proof of funds letter to be submitted with the purchase contract. With most Hard Money Lenders, it is not difficult to get qualified. Usually it takes a simple application, a bit of information about your experience or lack thereof and some personal information.

The advantages of using Hard Money Loans are:

1. No Credit history, tax returns, W-2′s or job history
2. You can make All Cash Offers
3. The property value is used to determine the loan, not your income.
4. Close in a very short time frame.
5. Purchase the property and have the funds available to rehab it in one loan.
6. The Hard Money Lender understands all aspects of rehabbing and can, if necessary, be flexible on their programs.

THINGS YOU NEED TO THINK ABOUT WHEN PURCHASING A HOUSE FOR REHAB

Pricing your home is one of the most important aspects of your rehabbing. You should determine a selling price when you purchase the property. However, sometimes things change and the original price you calculated to sell it is not longer an option. Always remember that you make a profit when you BUY the property, not when you SELL it!! This means that if you do not make a wise and well thought out purchase, there is no way you are going to make money. It just doesn’t happen because you want it to happen. This is a process that needs to be calculated to the end and that includes the SALE of the property after it has been rehabbed.

Pricing: Realize that because of the economy and the current housing market conditions, there are many properties on the market. Some are in great shape, some need a little work and some need a lot of work. Also there are a lot of pre-foreclosures, foreclosures and short sales. Ask yourself some questions:

1. Would I buy this rehabbed home before buying a pre-foreclosure, foreclosure or short sale (distressed properties)?
2. How is the new buyer’s appraiser going to evaluate the home; equal to the distressed properties in the neighborhood or better? Sometimes appraisers don’t look at the upgrades you may have put in to your project. A “budget” buyer might buy the short sale or foreclosed house that needs a little work for less money than what you are asking.

Test the neighborhood:

1. Are there many distressed properties in the area?

2. Are there a lot of vacant lots?

3. Do the neighbors keep up their properties?

4. Are there schools nearby?

5. Are shopping areas convenient? Within walking distance?

6. Are there streetlights and sidewalks?

7. What about transportation? Bus lines? Train Lines?

8. Do comps in the neighborhood. Have your Realtor pull rehabbed properties in the same area that have recently sold (within 6 months), or do drive-bys yourself and look up the comparables with www.zillow.com or www.realtytrac.com. These sites will give you approximate values and can help you make the decision whether this is the right house to buy for rehab. Don’t fudge the numbers. Make sure you comps are similar size, number of bedrooms and baths, design, frame or brick, etc. If one or more of your “test items” does not work out, then move on to another property.

All of this must be considered when making a purchase for rehab.

The actual funding of the deal, the paperwork and how it works will be discussed in my next article.

I have ten years experience in Real Estate Investing. As a Real Estate Broker with my own company, I have personally rehabbed properties and wholesaled single family and two-flats in the Chicago area.

I am currently writing E-Books on Real Estate as an Investment, Hard Money Lending and Rehabbing for Profit that will be available on my website at http://www.RealEstateRehabProfits.com. Hard Money Lending criteria is available on the website http://www.zdeinvestments.com

I will also continue contributing shorter articles on many subjects pertaining to Real Estate.

Author: Rebecca A Miller
Article Source: EzineArticles.com
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Post-crisis traditional mortgage and home equity lending is of no help when money is needed fast. That is why many people turn to non-traditional loans backed by real estate, commonly known as hard money loans. For many this seems to be the only option at a time, despite higher interest rates, points, and lesser loan amounts. Many people, not accustomed to dealing with hard money lenders, have many questions that they have no answers for. Below are some important must-do things necessary to ensure positive borrowing experience.

Do Not Forget To Ask If The Lender Is Licensed

Always make sure that your hard money lender has a state license. License is always a proof of reputability and history of complying with guidelines set by government. Being similar to banks, while not being so closely monitored by government officials, hard money lenders have to have a license. While license is not a panacea, it is definitely an added layer of protection from illegal lending and scams.

Always Perform Due Diligence

Checking your potential hard money lenders is important no less than checking any other business you are planning to deal with. Many people think that since they are to be the recipients of the loan, the lender experience, reputation, and connections are of lesser importance. Always check how long potential lenders have been in business, how experienced the employees are, and what their funding sources are. Collect any references they may have. Such background check may ensure you will get the best deal possible.

Check Your Local Real Estate Market

Well, real estate market is doing badly nationwide; however some areas are better than the others. This is quite important, since generally the better the market is, the lower interest you may get on your hard money loan. Sometimes this difference may be as high as 10 points on your annual percentage rate. Therefore, make sure you know what you may be facing in advance.

Try To Deal With a Reputable Broker, Or, Better, With Direct Money Lender

It is always better to get straight to the source, saving money by eliminating any middlemen. While this may not always be possible, it is highly advisable to look for direct money lenders first. Should you find a few, choose the one that is most reputable. Should your direct money lender search bring no results, it is time to look for a broker. Knowledgeable and competent brokers are as not easy to find, as you may think. Therefore, do as much research as possible before making a selection.

Always Read The Fine Print

Hard money loans mostly feature an extensive fee structure, besides interest rate itself. They usually come loaded with points, sometimes as high as 4-8, and heavy prepayment penalties. While these may be tolerable if you intend to keep your hard money loan for a full duration, they are true money wasters once you decide not to keep your loan for a full term. If that sounds like your situation, and you only need the money for a short period of time, then proceed with caution: always try to find lender that charges minimal points and prepayment fees, if any.

Mary Wise is a personal loan consultant who has been associated with Bad Credit Loans and has more than thirty years of experience in finances. She has helped a lot of people to obtain Fast Unsecured Loans, and many other products regardless of their credit situation. If you want to learn more about Personal Loans you can visit her at BadCreditLoanServices.com

Author: Mary Wise
Article Source: EzineArticles.com
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You’ve decided to get a non-traditional loan. A hard money loan seems to be your best option at this time. Here are a few ideas and questions to ask designed to help aid your search for a reputable hard money commercial lender, broker, or referring source:

State License: Make sure the hard money lender you choose has a state license. Even though they are not as closely regulated as banks, it can safeguard you from scams and unethical lending procedures. Ask if they have a state licenses. Every hard money lender must have one. Make sure they do.

Money Lender Experiences: Ask how long they’ve been in business. How many successful deals have they made? How long have they been in business? How many collective years of experience do all the people at the company have? Look for a hard money lender that has “direct hard loans lender” in their advertising. It’s a good sign.

Industry Connections: How many hard money lenders and investors does this company work with? Go with one who has several funding sources (Hedge funds, Mortgage pools, Private Equity Groups, etc.). The more connections they have to direct hard money lenders with ready cash, the faster – and better they’ll get the job done.

The Commercial Real Estate Market: How is the market in your area? The better the market’s doing, the lower your hard loan interest rates may be. Probably abound 20%. If the market is slow you may end up paying up to 29% in interest. Make sure you know the market in your area.

Brokers: The company or referring source that helps you with your search for your hard money loan will have a lot of influence. Make sure they are competent. How? Ask someone who has dealt with hard loans before. Ask your lawyer. Do as much research as you think you’ll need. Hard money brokers will help you shop many investors and lenders to find a loan that works for you.

Direct Money Lender: Some hard wholesalers or direct lenders can fund your loan directly. Direct money lenders are a more direct way to get your loan underwritten and eliminate the use of a broker or referring source but, may have to start the application process all over again if you started with a broker. Either way, make sure you are working with a reputable company who has a proven record of success with hard lending.

Prepayment Penalties – Ask if there is a prepayment penalty. These are fees you’ll have to incur if you if you pay more than the agreed on monthly installment. This usually happens when you can refinance or sell the property quicker than expected. Try to find a hard lender loan that does not charge these fees at all.

Are you looking for the best deals and rates on Money Lenders? Visit http://directmoneylenders.com/ today for more information!

Author: Scott Bowens
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Why A Hard Money Loan.

The reason real estate investors choose to use hard money loans is that they are a source to purchase and rehab property to make a substantial profit that they may not have without the use of this expensive money. These short term loans are expensive and even if they were legal for a home owner to borrow from the private lenders offering these loans it would never be advisable. So how hard are these short term loans, you ask? The answer is threefold. They are restrictive in loan to value, they are high in rate and high in fees.

Restrictive in Loan to Value.

The maximum loan to value for most private loans range from 50% to 75%. No deals are done at the higher loan to value for two reasons. First the hard money lender requires lots of equity in case of default they can list and sell the property quickly because they will in theory be below market value. The reason I say in theory is because there are so many REO’s, Short Sales and foreclosure properties on the market today that what was normally considered an exceptional deal is common place. Therefore, private lenders are more particular about the properties, borrowers and loans they choose to fund.

Secondly, any real estate investment that has less than 30% equity are not good investments for the investors unless they are purchasing the property for the cash flow. In that case they are long term investments and not suitable for the short term nature of these expensive bridge loans.

High Interest Rates.

Whether as n real estate investor buying and or rehabbing commercial or residential investment real estate the interest rates are much higher than conventional commercial or residential investment lending. The rates are higher much because the risks are much higher and there source of these funds are limited. Risk and Reward. Supply and Demand. The risks are higher because these loans are not underwritten based on the standard conventional guidelines and there is a very limited or no secondary market for private bridge loans. This is generally not an issue because the borrowers know these are only short term loans. The terms range typically from 3 to 24 months. Therefore, the higher interest rate is of minimum importance because both lenders and borrowers know that the borrowers have an exit strategy to quickly payoff these high interest rate loans. Most lenders require a viable and verifiable exit strategy before they make will the loans.

Higher Points.

Because these loans are short term in nature the hard money lenders always charge discount points. They may charge 1 to 5 points. In addition the private money brokers will charge 2 to 5 points. An average a borrower will 5 to 10 points. Plus closing costs. These are high fees. They only make sense when an real estate investor will make substantially more money and they have no other way to fund the deals.

Why Use Hard Money Lenders.

Simply to make money. As a real estate investor you have choices in financing your deals. You can choose conventional financing that requires at 30% to 35% down payment for properties that are in good shape. There are many other conventional mortgage criteria including credit, cash reserves, seasoning of funds and property. These all make conventional financing almost impossible.

Another option is to use your own funds and not finance a deal at all. But, most astute real estate investors know that if they can make a net profit of $25,000, $50,000, $100,000 or more using a hard money loan they do not like the fees but they we pay them versus not making any money because of lack of financing.

Louis Jeffries has been a Mortgage Banker for over 20 years. A Investor Rehab Specialist Louis will help you fund you next rehab or construction project. Contact Louis louisj@alldominionmortgage.com 708-299-3244 Visit The Blogs Investor Rehab
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Author: Louis Jeffries
Article Source: EzineArticles.com
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With residential foreclosures on the rise in the US, many homeowners are finding themselves in situations they never though they would be in. With adjustable rate mortgages coming out of their fixed period, the opportunity to refinance into a secure loan has diminished as lenient lending policies have become a thing of the past. Additionally, individuals who have been previously classified as “sub prime borrowers” are now finding it more difficult than ever to refinance.

With borrowers who have previously provided little or no documentation, where would they go today when times get tough? Mortgage banks today are being extra cautious even with borrowers who achieved levels of creditworthiness. Private lending companies are emerging to satisfy clients who fall into these cases.

Hard money loans traditionally carry higher interest rates than loans made from banks. Many times they require that the borrower have a certain amount of equity in the home. Many hard money and private lenders will tailor the contract and agreement to make it a beneficial solution for all parties involved.

Hard money lenders in the past have developed a negative reputation for “loan sharking” money at high interest rates and seizing properties should the borrower fail to make a payment. Today, a hard money loan might make the difference in being able to stay in a property and prevent a potential foreclosure.

When used properly, a private mortgage loan can buy a borrower the time to make necessary life and financial changes to prevent a foreclosure from happening. A hard money loan today can be a very useful tool and a life saver for a sub prime borrower from losing their home.

Before accepting a hard money loan, keep the following in mind:

1) Research a few hard money lenders in your area and discuss your situation and the terms of the loans being offered to get a sense of the market and how you fit in.

2) See what a few lenders are offering you and be prepared to negotiate. Every dollar and fee is important and needs to be understood. Remember, these loans are negotiable as it is mutually beneficial for both parties.

3) Do not accept a loan amount greater than you need. You will be more likely to spend that money (which comes at a much higher interest rate) and have to pay it back over the life of the loan.

4) Involve your accountant and real estate attorney. They may put you in touch with a reliable company that will not put you in a more difficult situation if things should turn for the worst. Their relationships and referral volume may end up getting you a great deal.

5) Private lending is a profitable business and lenders are always looking to mitigate their risks while helping others. Be honest and upfront with the loan officer regarding your situation. It may be the difference in getting a loan with a lower interest rate and more favorable terms.

Your story is important to the loan officer so being truthful is key. As borrowers are approaching foreclosure many feel their pride is at stake and are embarrassed and ashamed about their situation. Being proactive and honest as a borrower is the first step on the road to financial recovery and hard money lending today is becoming a popular and useful solution.

Nicholas Cuttonaro is a successful mortgage professional and publisher of http://www.MortgageLoanDetails.com

Author: Nicholas Cuttonaro
Article Source: EzineArticles.com
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A hard money loan is a loan that is privately funded, usually by companies that specialize in real estate. They give short term real estate loans to people to people (including people who may not be able to get a traditional mortgage) with the purpose that the purchaser fix up and sell the property for a profit. There are many ways that a hard money loan may differ from what most people expect from a real estate loan, but that is the major way, a private money loan is not intended for purchasing a home to live in.

Another way private money loans and bank loans differ is in the requirements to get financing. Hard money loans are generally easier to obtain than mortgages. The credit score necessary is often lower. It is even possible for someone with bad credit to get financing for commercial or investment property.

There are a few reasons why hard money lenders are able to approve loans more easily than banks. The first is that they charge more in interest and fees. They have to in order to compensate for the high risk they are taking.

Another reason they can afford give out these high risk loans is that they generally only give them out for around 65 to 70 percent of the market value of the property. It is up to the buyer to either come up with the difference, or to buy the house for below market value. This is completely feasible in the times we find ourselves in. It is an unfortunate reality that more and more people are getting foreclosed on. By only financing part of the market value of the property, private money lenders make sure if their client does get foreclosed on they can still recover their investment. By selling the property for market value, that way after fees, the lender breaks even.

Another major difference between hard loans and traditional mortgage loans is the length of their repayment period. Most private money loans have a maximum duration of 2 years. After that, if the client wishes to remain with the property, they must refinance.

These are just a few of the main ways in which hard money loans differ from traditional real estate loans. There are also many differences among various private money lenders. If the goal is to get a loan for a commercial or investment property, and little credit and/or a traditional loan doesn’t seem to be the best option, than a hard money loan should be considered. There are plenty of references to be found online, the right answer is always in the hands of the consumer.

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