Hard money loans are a form of private money loans, where private lenders lend a borrower money to invest in a property instead of traditional government institutions. Real estate investors utilize hard money financing specifically, as such loans provide short-term funding when they need it most for a good investment deal. Hard money loans are a popular go-to option for the house-flippers who cannot turn to banks for loans. Let’s take a closer look now at the basics of hard money lending,
Hard Money Loans: The Right Deals
The ideal deals for hard money loans are out there—and a good real estate investor will know when to act. Since property with good potential can go fast, such investors need to act quickly and efficiently. When they seek out private loans as “rehab” loans, they must include the property’s cost in addition to the cost of renovation. Hence, potential borrowers must be absolutely positive a deal is comprehensively good for the total duration of a project before they seek out a hard money loan.
Typical Borrower Requirements
Traditional lenders will require proof an individual can repay them—and quickly. Hard money lenders will typically look at a potential borrower’s credit scores and assets, such as income, to ensure their ability to repay. Hard money lenders are a bit different in their approach, which further explains the basics of hard money lending.
Hard money lenders tend to focus on the deal and look at collateral first. The collateral’s true value is more important than the borrower’s ability to repay, since there’s a direct back-up plan in place if anything goes wrong. The property value determines their decision. If the after-repair value (ARV) is high and the borrower can make their monthly payments, a loan can be secured. Terms should be more negotiable.
The Pros of Hard Money Lending
Hard money lenders have standard lender guidelines, with short-term loans that generally last from six months to a few years—but loan terms can be competitive between different lenders. Shopping around is a great idea to find terms that suit the situation. Once a borrower agrees upon terms with a lender, the documentation process can move quite quickly. Speed is critical when a person is purchasing a property in a hot real estate market.
If you’re currently in the market for a private loan for a potential real estate purchase, you’ve come to the right place. Out of the hard money lenders in Orange County, Val-Chris Investments may be the perfect lender for you. Whatever your financial requirements are, we have creative loan solutions that are sure to fit the bill. We specialize in both commercial and residential loans. Learn more about our services and how we can help you today.