Hard Money Lending: What Is Hard Money Loan & How To Get It

Author Casaldra Andreassen Read bio
Tags: hard money loan
Date: June 28, 2021

Getting a good, let’s even say a fair loan is the first big hurdle to most investors, but IPG has some expert solutions to help you rise above the complication, and find properties the way the pros do – with high margins and low competition.

I will help you diversify which types of properties qualify for real estate hard money loans. And what to look for in your hard money lender when you’re looking to complete your deals.

What Is a Hard Money Loan?

A hard money loan is a loan used for short-term real estate transactions. Contrary to a popular myth, a hard money loan is not named like this because it’s “hard” to get, but the borrower’s personal ability to repay the loan, and sometimes the likelihood of finding a lender that is willing to finance it.

Hard money loans are based on “hard” assets and the value of the property. On the other hand, we have things like personal earnings, debt to income ratio, and credit score – all considered as “soft” assets.

Also, hard money lenders usually ask for documentation to prove the income accountability, which will definitely have an impact on rates, but – a low credit score will never prevent you from getting a hard money loan.

You also have a variety of hard money loan options:

  • Loans with no down payment,
  • Refinance loans,
  • Traditional investment property acquisition loans, etc.

Advantages of a Hard Money Loan

Hard money lending can also refer to a currency directly supported by a valuable commodity such as gold or silver. This type of financing is thought to maintain a stable value, corresponding to goods and services, or exchange rates with softer monies.

Hard money lending has been highly prized during the course of history, especially for its relatively greater usefulness to mediate the exchange of goods, store value, and conduct profit-and-loss accounting.

Whether you are looking to secure financing for a purchase, refinance, or cash-out, here are some advantages to using a hard money loan.

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Closing Time Speed

Qualifying and finally being approved for a hard money loan is a significantly faster process than applying for a traditional loan through a bank. Some hard money lenders fund hard money loans in 5 to 7 business days.

Credit Score Is Not a Major Factor

When a loan is asset-based, it means that we base our loan amounts on the value of the asset, usually an investment property, multifamily building, or commercial building – rather than strictly on a borrower’s credit score, debt, or income levels.

Rehab and Non-Stabilized Property Financing

Properties that demand an abundance of work or that have high vacancy rates can be difficult for traditional lenders to finance.

Hard money lenders have the ability and the means to structure such deals that will allow investors to rehabilitate and stabilize their (future) properties.

A Word On Hard Money Lenders

Hard money lenders are individuals or (more often) private companies that accept property or other real estate assets as collateral.

Hard money lenders can have varying criteria for choosing those asserts (and individuals), depending on the risks for a deal.

They are often willing to extend the hard money loan as long as you need to help you flip your investment, but also help you get to know the value of deals so that your risks are lessened.

Some real estate investors think that it’s a smart thing to shop around, asking about interest rates, but experienced investors know there are more factors to consider than just finding the right hard money lender, or any lender to work with.

Hard money loans are indeed short-term loans, and when it’s directly funding a deal, there’s no need to charge interest for the whole time if you pay off the loan early.

Many hard money lenders fund real estate flips without taking the time and effort to determine whether or not the deals they are financing will end in a profit for the borrower.

What To Look For In A Hard Money Lender?

Just because a hard money loan offers fast financing doesn’t mean it’s a good, safe option for everyone.

Hard money lenders aren’t subjected to the same legal regulations as traditional, conforming loan lenders.

For the most part, this means that hard money lenders are free to make their own rules about what credit scores or debt-to-income ratios they expect their borrowers to have and pay.

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Hard Money Lender That Discloses All Costs Upfront

Not only a hard money lender should disclose all of the fees at the time of the loan offer, but they should also help you look at all the aspects of doing your deal, like:

  • holding costs,
  • selling commissions and
  • fees over which we as the lender have no control.

You should be able to understand all costs before you proceed so that there are no surprises.

Hard Money Lender With Great Terms

Because a hard money loan has a variety of loan options available, a hard money lender should procure something that will meet your priority needs, whether that be 100% financing, no monthly payments or low points and interest rates for your real estate investment.

Also remember, the best kind of hard money lender is a hard money lender you can trust.

Hard Money Consultancy

You’ve got a property and all you need is finance, but all the regulations make you dizzy? Well, you’re in luck. Contact IPG in just minutes and get all the necessary details concerning loan amount, cash-to-close, loan costs, and more.

Let’s decide together how to move forward, and find the best, long-term hard money loan resource, or any property you have under contract. Fill in the contact form and speak with our team of real estate professionals.

Our systems and programs are designed to help new investors learn to recognize not only potential profits but also risks. IPG helps you flip profitably.