Everything you should know regarding hard money loans
Most of us assume that hard money lenders are shady. Though a few lenders in the industry have ruined the reputation of this form of loans. This means not all hard money lenders are bad. You can get a reputable hard money lender who can offer finances to help you invest in real estate. A hard money loan is a secured form that is given on a short term basis. Unlike conventional lenders such as credit unions and banks, private investors fund hard money loans.
Most hard money loans last for 12 months. If you choose the right lender, you may get one that offers extended durations between 2-5 years. This loan needs monthly repayments of mostly the interest. You will be required to make a balloon payment at the end of the period. The amount that you can borrow when applying for this loan depends on the value of the property in question. If you have a particular existing property, you can use it as collateral. You can also use the property you want to acquire as collateral.
Regarding your credit score
Unlike other types of loans, you must not have a good credit score for you to secure a hard money loan. If you have a new job, you may not have a credit history for you to acquire a conventional loan for your investment. People who have recently undergone a foreclosure or short sale can also get approval from hard money lenders. In this case, you should have sufficient equity in the property, which should act as collateral. Although some lenders do offer loans to those with bad credit scores.
You can get this loan with any form of property. Whether you would like to invest in a residential or commercial property, you can try applying for a loan from hard money lenders in Las Vegas. Some of the hard money lenders are comfortable working with a specific niche of loan. You may get one that specializes in residential properties while another deals with industrial properties.
Take note that this type of loan is ideal for borrowers who have a hard time securing a conventional loan from the bank. If you also need the loan within a short period, you can apply for such. While most of the loans take weeks or even months to be processed, you can get a hard money loan within 1 or 2 days. Some of the lenders approve hard money loans within a few hours after application. This can be convenient for a borrower who needs to close the deal fast. Especially, when the property in question has a lot of competing bids.
Though hard money loans take a few days to be processed, they come with high-interest rates. These rates vary from one lender to the other, and comparing hard money lenders can help you choose one with reasonable rates. Lenders take a great risk in offering this loan since they don’t have the assurance that you will make payments. As you borrow this loan, you have present a repayment plan to convince the lender that you are a credible borrower.