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Are There Really Instant Hard Money Loans Or Is That Just A Marketing Come-on To Confuse Investors?

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.

Is A Hard Money Loan Right for You?

Don’t let their moniker mislead you. Securing a hard money loan is easier than you might think. In fact, it’s often easier to acquire a hard money loan than it is to find investors and companies that offer them. But not anymore!

There’s a fairly reasonable chance that you’ve never even HEARD of a hard money loan, much less found one. It’s a pretty low-key lending alternative, and for good reason. With the potential millions that can be made through hard money lending, and the massive real estate empires to be had, it’s no wonder savvy investors want to keep it secret.

Today, we’re going to let the proverbial cat out of the bag… Get ready to discover the fastest, simplest way to translate lucrative real estate opportunities into an actual real estate empire!

The Core of Hard Money Lending…

In the simplest of terms, hard money loans are a “creative” lending alternative that offers borrowers a wider variety of options, with less financial scrutiny. In exchange for these concessions and the increased “permissiveness” in the credit history and financial areas, hard money lenders are rewarded with higher interest rates and returns than conventional lenders typically earn.

This means that even those of you who’d NEVER qualify for a traditional loan now can have a realistic, ethical opportunity to build a multi-million dollar real estate empire one deal at a time.

However, aside from the higher interest rates and the lower levels of financial scrutiny, hard money loans are remarkably similar to traditional secured loans.

There are a few other differences that must be taken into account as well:

1. When borrowing against real estate, hard money loans typically have lower loan-to values than conventional loans

2. Hard money loans are not backed by the FDIC, and

3. The terms of hard money loans are generally paid off much sooner than conventional loans are.

Of course, if you’re looking for big money fast and you don’t have time (or the ability) to jump through the hoops or cut through the red tape of bank financing, there’s no other solution that has as much to offer.

Now that you know the basics of WHAT hard money lending is, now you’d need to figure out if you can put one to work for you.

Will A Hard Money Loan Work For Me?

Once you’ve discovered the option of hard money lending, it’s only natural to wonder if it could make a difference in your own situation.

Are you a victim of a marred (or non-existent) credit history?

Have a few mistakes in your past wrecked your ability to qualify for conventional financing?

Has a recent divorce or bankruptcy made you a leper in the lending community?

Have you stumbled across a once-in-a-lifetime real estate investment opportunity, but you have to act fast and have no idea where you can get the money?

Have you come to the conclusion that you’ll NEVER find the financing your hopes and dreams demand?

If you answered yes to one or more of these questions, then you’ve already qualified yourself as an ideal candidate for a hard money loan.

However, you may have a few legitimate concerns. Fortunately, we’re here to lay your concerns at rest.

Anything BUT Shady…

The most prevalent concern raised in the discussion about hard money loans is actually based on a misconception.

Because hard money lenders put their money at a much higher risk than banks EVER will, and they charge higher rates to compensate, the uninformed often jump to the conclusion that there’s something shady going on.

Conventional lenders and people who are missing pretty essential facts don’t work too hard to correct those misguided notions either.

Fortunately, “The truth is out there…”

Hard money loans follow the same basic protocols that traditional options do. Because financing is complicated under even the best circumstances, your hard money lender will encourage (perhaps even require) that you retain the services of a lawyer from the onset.

Its advice you should take advantage of ANYTIME you sign a deal for a high ticket item.

There are several other parallels you can plan on as well:

o Appraisals

o Inspections

o Paperwork and

o A “closing”

…just to name a few.

One of the essential tenets of successful real estate investing is learning to apply the principles of leverage. Leveraging is about more than just putting other people’s money to work for you – it’s about putting other people to work for you as well. When you’re up against a “big deal”, if someone else out there can do it better and faster than you can on your own, you’d be silly NOT to hire them!

Their expertise is almost always worth the fees entailed. With them, you can avoid time-wasting mistakes and potentially devastating errors you might have otherwise missed.

Finding a hard money lender you can trust is the first step in the journey.

Hard Money Loans – Reasons Why You Might Want To Try Applying With A Subprime Mortgage Lender

Before you apply for a hard money loan, try applying with a subprime mortgage lender first for lower rates and fees. Hard money lenders charge excessive fees to high-risk borrowers, but will only lend 50% to 75% of the value of the property. On the other hand, subprime lenders offer loans to similar high-risk groups, but with better terms.

Lower Rates

Subprime lenders specialize in B, C, and D class loans. Even with a bankruptcy in your financial records, you can still be approved for a mortgage with a subprime lender. To protect themselves from the higher risk of foreclosure, subprime lenders charge a couple of interest rates higher with additional fees.

Hard money loans are funded by private individuals, who require high interest rates somewhere between 12% to 18%. This is nearly double what a reputable subprime lender would typically charge. You can also expect to pay higher fees upfront with hard money lenders.

Reasonable Terms

Subprime lenders offer mortgage loans similar to that of traditional mortgage lenders. You can expect regular payments and terms, such as no early payment fees. Subprime lenders also require smaller down payments, even zero down if you have a FICO score of 600.

However, hard money lenders may require a balloon payment in one to two years or other difficult terms. Hard money lenders also require as much as 50% of a down payment for the loan to ensure they will make a profit even if they foreclose on the property.

Refinancing Option

Subprime lenders also offer refinancing, unlike hard money lenders. Many subprime lenders will automatically offer refinancing after three years of regular payments so you can reduce your mortgage interest rates or tap into equity. Hard money lenders are interested in high profits, so they will only deal with high interest rates and terms profitable to them.

The Reason For Hard Money Loans

Hard money loans have their place in the financing world. Primarily used for property speculation and development, hard money loans make sense for short-term borrowing. They can also be successfully used for purchasing non-traditional properties such as ranches, where the property value is not realized by a traditional bank.

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