Hard Money Loans

For anyone seeking residential hard money loans, time is of the essence. The major reason that people seek this kind of unconventional financing is because banks simply take too long, or they are unable to meet the increasingly strict criteria that the lending institutions put forth.

There is some confusion over what the money can be used for. One reason for the confusion is that lenders and brokers use different terminology. In some cases, they mean to confuse the borrower. In others, they simply forget that everyone is not as “savvy” as they are. Below, you will find some common terms used by financers and what those terms usually mean.

Acquisition loans are hard money home loans used to purchase a property. The amount available will vary depending on the lender. It is usually a percentage of the appraised value. Commercial banks typically require that you have around 20% of the purchase price. Else, they will charge a higher interest rate. Private lenders may be able to finance the entire amount and the closing costs are usually lower.

Construction loans may be used to build a residence, but they can also be used for repairs, expansions or upgrades. Current homeowners or real estate investors may be interested in these types of hard money home loans. Conventional lenders typically require that the property in question is or will be your main residence before they will approve financing. Private lenders are usually more flexible.

Mezzanine loans typically refer to residential hard money loans that are similar to second mortgages, but the term may also be used to refer to specific kinds of business loans. Mezzanine loans are short term, typically three years or less. The funds may be used for a variety of reasons, including “buying out” a business partner. The amount that you can borrow depends on the resale value of your home or business, minus the amount of other outstanding loans, such as a first mortgage, in other words, the amount of equity that you have.

Asset based hard money home loans may be used for any purpose, as long as you have collateral or assets to “put up”. Conventional lenders refer to them as secured loans. The primary difference is the time that it takes to complete the loan, but there may be other differences. If you have collateral, private lenders may not be as concerned by your credit score. For conventional lenders, a less than perfect credit score may end up costing you thousands of dollars more, because of higher interest rates, if they will approve the loan at all.

Bridge loans fill in the gap when permanent financing solutions are in the works, but the actual purchase needs to be completed quickly. Bridges may be commercial or residential hard money loans. The funds can be used for practically anything. Depending on the lender, there may be no limit to the amount you can borrow. The funds are made available to you quickly. But, bridge loans are very short term solutions, typically not more than 6-24 months. So, you need to know where your long term financing is coming from.

Both private and commercial lenders might use other terms that you do not understand. The best advice: When you do not understand, ask for clarification. As mentioned above, some lenders simply forget that everyone is not familiar with the “lingo”. If a lender is unwilling to explain something to you fully, then you should probably seek another source for your residential hard money loans.

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 Guide, a comprehensive resource for those looking to secure funding for real estate projects.

Author: James Whitmore
Article Source: EzineArticles.com
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You’ve found a great opportunity to make some money. You’ve heard about hard money bridge loans but you don’t know what to expect? Here are some of the basics:

The biggest advantage of a bridge loan is the lenders are always concerned about the value of the property, not so much you personally. In other words; the property is what secures you the loan not your current credit status. It’s all about the value of the property.

The life of a bridge loan is approximately one to six-months; although you can get an extension of up to 2 or more years. Again, these lenders are not your average banks. The flexibility of this type of loan is why you will either get approved (or not) in as little as 2 days.

You may be asked by the lender why are you looking for a hard money loan instead of a traditional loan? There are many reasons why someone may consider using hard money loans. Most likely your response will be because you need the money now and not three months from now when the window of opportunity has most likely closed, or you may respond that your credit has some blemishes, filed recent bankruptcy, low occupancy levels, etc.

Some of the things your hard money loan lenders want to know will be: the type of collateral, the location and approximate value of the property, the amount owed and most important, the exit strategy of the loan or how will you pay the lender back.

Most bridge loan firms want your business and will work with you to get you 60% – 75% financing. (In some cases you can get 100% financing if you have additional assets to put into the deal.) In 99.9% of most cases, the hard money lenders are private companies, and you won’t typically get 100% of the value of the property. The low loan to value is in place to protect the lender in case of default on the loan.

Be prepared though, the interest rate on hard money loans is much higher than on traditional loans. Expect 10 to 15%, depending upon the overall risk. There will also be points or origination percentages that range between 1 and 5% of the loan amount set forth by the lender and assessed at the close of the deal. However, the higher interest rates, flexibility, and the quick turn-around often offset all the paperwork and time involved with traditional banks.

Some hard money lenders charge a fee for pre-payments, some charge an exit fee for the loan and others charge nothing. Make sure you know exactly what the terms of the proposed loan are before engaging any lender. A detailed letter of Intent is an excellent way for you and the hard money lender to understand exactly what is expected by each party.
One more thing, if you are not familiar with bridge loans do some in-depth research first. Talk to others who have experience with hard money bridge loans or ask your lawyer for some help. Don’t forget, there is plenty of information on the web that you can use to your advantage.

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

Author: Scott Bowens
Article Source: EzineArticles.com
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There are tons of loans available for real-estate investors. One type of loan commonly used by investors is the Hard Money loan. These loans allow investors to buy and fix investment property. If used correctly it can definitely put money in your pocket right away. But, be aware because there are some pitfalls you will need to avoid in order to be successful. Below explains how a Hard Money works and what to look out for.

1. Scope of Work- for these specific types of loans lenders will require the investor to provide a scope of work worksheet. Every repair you plan to make needs to be written down on this sheet. The scope of work worksheet is what the Hard Money lender will use as a guide, in order to pay for the project. If repairs are done that are not on the worksheet, then you may have trouble getting reimbursed by the Hard Money lender. The lender will want to see everything written down to be sure everyone is on the same page. Lenders will normally allow investors to change the scope of work in the middle of the project if able and necessary.

2.Requirements- Most Hard Money lenders now want 20% down from the investor on all projects. The lender will also want to see reserve money sitting in a bank somewhere. The investor’s monthly income will play a big role with the lender in approving the loan. Credit score is a factor, but they do not require a stellar score to be approved for a loan. The last Hard Money lender I used did not even pull my FICA score, they just wanted to see a copy of my credit report-which I was able to order for free. There will be requirements for loan to value, but each lender will have their own set of guidelines.

3. Over estimating repairs- Repairs on an investment property is always just an estimate. When rehabbing property nothing ever goes as planned. Over-estimate the repair that needs to be done to cover yourself if any repairs are added later in the rehab. If you did a good job with the initial inspection, and no additional repairs were needed then you can return the money or keep it. If you decide to keep it do not spend the extra funds. Keep the extra money as additional reserve.

4. Process- The process of receiving money for repairs is called a draw. After your contractor finishes a percentage of the work you will call your Hard Money lender, and tell them that you are ready for an inspection. The lender will send an inspector out to verify the work has been done and completed within code guidelines. Once the inspector gives the lender an o.k., the lender will release the funds that equal to the amount stated for the cost of work. For example, if you listed carpet repair $1500, paint $1200, and new light fixtures $100; when the inspector checks all the items off: the lender will cut you a check for $2800. Now you can understand why it is important to have all repairs and cost listed on the worksheet. If the repairs are not listed then they will not pay you. Normally the lender will give you 3 to 7 inspection dates depending on how large the project is. Unless you can convince the contractor to start working without putting money down, you will have to put the money up to get things started. Expect to get reimbursed from the Hard Money lender through your draw checks.

5. Refinancing- This is the most important part in rehabbing property using a Hard Money lender. Hard Money loans are short term loans with high interest rates. These interest only loans will have an interest rate of somewhere around 15%. That may seem high, but these types of lenders understand how important it is to make their money and get out. We need these companies in order to rehab properties if we cannot fund our own projects. Hard Money lenders realize the risk they are taking, so lenders ask themselves “WIIFM” (What’s in it for me). They compensated with a high interest rate for the risk they take. Hard Money lenders expect you to either sale the property quick for a profit, or refinance into a long term loan and rent it out to a tenant. Whatever your exit strategy is, be sure to do it quick. Hard Money loans are normally due in full 6-12 months after origination.

Hard Money lenders have allowed many investors to make money in real-estate. These types of lenders are more flexible when compared to traditional ones. They allow investors to make things happen when no other lenders want to take the chance on them. Their guidelines are loser and allow an investor to spread his wings. These types of loans are expensive, but they can allow more deals to be done due to the amount of money they have access to.

Watch this video on hard money loans—–> http://www.youtube.com/watch?v=6KcUGPxM0cA. Get a Free Report “How to Buy Wholesale Property Without Any Risk” at http://www.AssetPropertiesATL.com/cheapproperty

Author: Khalid Johnson
Article Source: EzineArticles.com
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Private loan money is most often referred to as hard money, and usually the loan comes from a source that specializes in structuring such loans. More often than not a hard money loan will consist of a first mortgage on a residence thus creating hard money residential loans. There are a number of identifying factors involved in private loan money that will be referred to as a hard money loan.

For instance, as mentioned it is usually a first mortgage. Because the borrower’s credit does not matter as much as the amount of equity in the property, a first will in effect prevent a possible loss of the entire property if, for instance, another loan is “ahead” of the hard money loan. The reason why the borrower’s credit does not matter much for private loan money is that the lender looks to the property for its security, and the lender is also being paid dearly for the chance that the lender is taking by basing all the money on the property value alone.

You see, another facet of a hard moneylender is the fact that they usually charge very high interest rates as well as high points. At times, if the property is secure enough, those high points will be rolled into the actual loan. Often the loan is not paid in the typical Principle + Interest (PI) but more than likely is interest only with a balloon at the end of the stated loan period. In this manner, in effect, the borrower is paying interest on interest, since points are interest, and since the mortgage may have been calculated including the points, then every payment the borrower makes, paying interest only, is actually interest on interest.

Generally, most hard moneylenders want a careful appraisal of the property. This is again used as part of the protection that the private loan money lender desires. The lender will look at the Loan to Value Ratio (LTV), which is the percentage amount that the loan will be against the current value of the property. For instance a 70/30 LTV on a property appraised at $100,000 means that the lender would lend $70,000 against that property.

Taking this example further, let’s assume that the hard money residential loan on the property is $70,000 and the deal will bring the lender 5 points at a 12% interest rate, payable interest only. The loan is due and payable in its entirety in 2 years.

5 points is equal to $3,500. ($70,000 X.05), and at 12% a year, the lender would receive payments of ($70,000 X.12 = $8,400 per year divided by 12 months= $700 per month) $700 each month for two years. Remember that points are collected at closing when the loan is actually made. Thus in interest only the lender will make $3,500 + $8,400 + $8,400 = $29,300 in just two years. Perhaps you can see why individuals liked to make hard money residential loans!

However, with property values falling so quickly many hard money lenders took quite a beating. With a loss of approximately 40% of the value originally appraised for, the lender now must also go through foreclosure, which is going to cost the lender at least $8,000, plus eviction proceedings costing about $1,000, and they still must bear the costs of repairs on the house which the evicted owner may have completely trashed, as well as any unpaid taxes.

Florida Home Loan Service can made your dreams of owning your own home become a reality. We offer the following options: Florida Rent to Own, Florida Lease Options, and Florida Owner Financing. You do not need good credit or a bank loan to become a home owner all you need is proof of income, and 3%-5% down payment.

At Florida Home Loan Service we find you that home that will just make your day all you have to do is call Suzie at 352-213-3424 and let us know what you kind of home are looking for and in which areas. Areas that we service in Florida, Alachua, Archer, Gainesville, Bronson, Chiefland, Cedar Key, Dunnellon, Ocala, Miami and Broward Counties.

Author: Suzie OConnor
Article Source: EzineArticles.com
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Hard money loans (HMLs) are a special type of loan backed by real estate collateral. Generally short-term loans with slightly higher interest rates, hard money loans are typically made by private individuals or companies not affiliated with larger banks. Though few people truly understand the hard money lending business from either a lender or a borrower’s perspective, the market represents an important opportunity for investors and borrowers alike.

A borrower usually takes out an HML loan using real estate property as collateral. The hard money lender will provide the loan on a “loan-to-value,” or LTV, basis. The “value” of a given property is defined in the business as the amount that a lender could reasonably expect to receive from the rapid liquidation of the real estate, should the borrower default and force a foreclosure. Generally, the HM lender will offer cash at a 65% to 70% LTV ratio – that is, up to 65-70% of the property’s current value.

HMLs are often more expensive (that is, they carry a higher interest rate) than many other types of bank loans because lenders often accept more risk of default in making the loan. Despite the higher rate of interest, borrowers may find HMLs attractive for several reasons:

- They do not require the stringent standards imposed by banks

- They are less influenced by a poor credit score or rating

- They have less need for acceptable documentation

- They can be used as “bridge loans” until other financing can be obtained

- They are often faster than traditional loans

Many borrowers choose to take out HMLs because of the lower requirements to qualify. People who face imminent foreclosure or who need money immediately often find that hard money loans are the best – or only – option.

However, because hard money loans have substantially higher default rates than traditional loans (due to less restrictive credit requirements), lenders usually take the first lien on the collateralized property, in addition to attaching higher interest rates. This lien is a legal claim to the real estate which essentially gives the lender first right for compensation from the sale of the property if the borrower should default on the loan.

Regulation of the hard money lending business varies slightly from state to state, but laws are generally non-specific and fairly loose, with a few notable exceptions, where limits on interest rates are set low enough to discourage most hard money lenders from doing business.

For more information on hard money lending for mortgage brokers, visit the website of the Pitbull Mortgage School at http://www.pitbullmortgageschool.com.

Joseph Devine

Author: Joseph Devine
Article Source: EzineArticles.com
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At any time if you stuck in financial crisis then don’t be panic just go for money before payday. These are financial schemes which provide you enough financial support in your hard time. As the name refers, these loans will provide you fund on same day of applying. But these loans are best substitute for your short term needs. This means these loans provide you cash for short time period. This time period vary from lender to lender.

Money before payday is a financial scheme which is easily given to UK people. If you are 18 years or above and you have great source of income then these loans are best option for you. To get cash fast, you must possess a valid checking account in your name. These loans will give you cash in less than 24 hours. This is because these loans are available on internet. Online way is the best method for applying for these loans. You just have to fill an online request. You are required to provide some personal particulars. After verification within few minutes lender will give you response about loan approval. Once lender issues loan to you then within few hours you will be able to accomplish your all urgent needs without any hassle.

Unsecured nature of these loans attracts more people. To apply for these loans you are not required to follow hectic and irritating formalities like huge paperwork and fax them. Now bad credit score is not a big issue for approving loan. This is because UK lenders offer a scheme without credit check. So if you have poor credit record then no need to worry. Just go for these loans.

The major problem in these financial schemes is high interest rate. Due to unsecured nature of loan and fewer formalities feature, UK lenders provide loan with slightly high interest rate as compared to others.

Are you in emergency and thinking about from where money will come? Don’t be unnerved, you can go for the short term payday loans. These loans are designed with the objective of short term requirements. You can’t use these loans with the objectives of long term. There are many options for you in the market. Terms, rate of interest also vary from lender to lender. You should search the market thoroughly, you will definitely find a cheap loan for you. These loans have nothing to do with the past credit history of a borrower. If you have regular monthly income then these loans are not that much difficult to get. Lenders are trying hard to tap the potential short term profitable market. These loans are generally comes at a higher interest rate. But they surely help you while you are in money problem.

Generally these Payday loans are processed through the internet so very fast. You can get a loan amount in your account within an hour of application. You can also use these loan amount in any purposes. You can use these loans to shopping or if your paycheck is late and you need to do payment of something then you can think of these loans. Though these loans are basically aimed at salaried people and to fulfill the requirements of the gap period between the two paychecks. These loans are not specified for anything. You can also take it to medical treatments.

The banking technology has evolved beyond our imaginations. You can now avail the services of banks from your bed room. Almost all the lenders are providing the on line facilities. The on line banking is not only convenient but also less time consuming. You can apply for the loan with out paper works and taking a leave from office. For more information you can go to the websites of the bank. There are many lenders in the UK market providing loans in a lucrative terms, find out the best one.

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Some of the more sophisticated real estate investors try to avoid hard money loans due to the high interest rates. However, a hard money lender may prove to be beneficial for the right type of property. Many individuals will be surprised to learn that a large amount of successful real estate investors often turn to hard money lenders. A hard money commercial loan is an asset based loan in which the borrower receives funds secured by the value of the real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial property loans and are almost never issued by a commercial bank or any other institutional lender. A hard money commercial loan is simply an advance for a commercial venture for which conventional funding is not available. It is money that is difficult to get elsewhere. The purposes for which these loans can be obtained include property acquisitions, construction, investments, business and industry refinancing.

There is a greater need for suitable collateral to obtain a hard money commercial loan. Appraisals from a third party on the collateral may not be necessary because a hard money financier may be experienced enough to assess the value of the property. However, in most cases an appraisal is warranted. Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non owner occupied properties. Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.

Hard money interest rate is not dependent on the Bank Rate. It is instead more dependent on the real estate market and availability of hard money credit. As of 2007 and for the past decade, hard money has ranged from the mid 15% – 25% range. When a borrower defaults they may be charged a higher “Default Rate”. That can be as high as allowed by law which may go up to or around 25% – 29%.

Hard money lenders can be approached directly online or through brokers. In either case, shopping around and comparing the rates and terms would be important. The main consideration in taking a hard money commercial loan is whether it would generate enough money to comfortably service the debt. A sophisticated investor knows how to look for undervalued properties and negotiate a great price especially if the seller just want to relieve him/herself of the property. If you find a great deal on a property, weigh your options and do your calculations to determine if it would benefit your in obtaining a hard money loan.

Author: Varondria Williams
Article Source: EzineArticles.com
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