Finding a Good Hard Money Lender

by | Jul 22, 2015 | Blog

Hard money is a type of real estate loan that is an alternative form of financing. If a traditional financial lender is unwilling to approve a loan, or a loan is needed quickly, hard money is sometimes the only option left. Hard money loans are primarily based on property value, rather than solely on the borrower’s credit worthiness. Hard money loans typically have higher LTV (loan-to-value) ratios than most bank financing allowing a borrower to leverage more of their own money, and bring less to closing.

What is a Hard Money Lender?

Hard money lenders are basically private individuals or companies who lend capital in order to finance real estate deals for business purpose. Hard money lenders fill the void that banks and traditional lenders refuse to do, by loaning on distressed properties and providing the funds necessary to rehab/renovate a property. Hard money lenders offer programs with rates, terms, and fees that you’ll need to understand before signing on the dotted line. Keep in mind that fees and rates are generally higher than traditional loans, due to the fact that there are more benefits by using a hard money lender.

How to Find Hard Money Lenders

A quick Google search using the phrase ‘local hard money lender’ will likely show a number of potential lenders you can possibly use. Your local meetup group or REI (Real Estate Investor) club is a great way for you to find a reputable hard money lender.  Networking with like minded people at these meetings or events will help you find the lender, as well as other resources you may need, to have a successful deal.  You can also search on www.aaplonline.com which is the American Association of Private Lenders website.  Members of this national organization agree to follow a code of ethics that was developed by experienced lenders.

What to Look For in a Hard Money Lender

Here are some key traits that every reputable hard money lender should ideally have:

1. Expertise

Any hard money lender should have expertise not only in real estate financing, but also real estate investing.  There should be at least someone on the hard money team that can provide real world experience in rehabbing property, flipping property and/or renting property.  You will gain tremendous value beyond just the loan by using a hard money lender with this type of experience as they can help you evaluate your deal and make sure the returns you are expecting are actually achievable.

2. Speed

As the availability of deals has transitioned from MLS to wholesale in many markets, the ability to close quickly is a competitive advantage.  A hard money lender should have the resources in place to approve your application quickly (less than 24 hours), get your deal evaluated, and process and close in the required timeframe.

3. Transparency

Trustworthy hard money lenders will fully disclose all of their fees, rates, and terms of the loan that they are offering you.  By doing a little homework, you should be able to quickly determine if  you are working with a reputable lender that you want to fund your loan.  Also, a good hard money lender will treat you professionally and be very respectful of your current situation and financial goals.

Investmark will address any of your questions or concerns about hard money lending. We’re a highly respected name in Texas when it comes to hard money loans. Contact us so we can share our knowledge and expertise with you today.

How does a hard money loan differ from a conventional mortgage

How does a hard money loan differ from a conventional mortgage

by | Jul 22, 2015 | Blog

If you are looking to invest in real estate and need financing, you might be thinking you have two options: a conventional mortgage or a hard money loan. Though most people understand the basics of a conventional mortgage, many may wonder, “what is a hard money loan?” Here are some common differences between the two types of loans.

Funding source

Conventional mortgages are funded by lenders who sell their loans to larger banks or to other investors. Hard money loans are funded mostly by private lenders. The money may come from individual investors, lines of credit, or various types of investment funds. Hard money loans are typically not sold to anyone, remain with the originating lender through payoff, and are usually serviced by that lender.

Time Frame

One of the biggest differences between a hard money loan and a conventional mortgage is how long it takes you to close. With a conventional mortgage, it usually takes several weeks to close. With hard money, you can usually close within a week, sometimes less. The time it takes you to get money can be crucial when you are buying from someone who wants to close quickly.

Interest Rate

Across the board hard money rates are higher than on conventional mortgages. This is due to the fact that hard money lenders are only loaning the money for short periods of time and not for 30 years where they would be collecting large amounts of small interest payments over time. Hard money interest rates are also higher due to the fact that the majority of the properties financed are distressed.

Property Type

Lenders offering conventional mortgages will typically loan on residential properties used for personal residences, as well as rental properties. These lenders place a larger emphasis on the credit-worthiness of the borrower, as well as the condition of the underlying asset. Properties that are distressed cannot be approved for a conventional mortgage. Hard money lenders lend for both residential and commercial properties, although they almost never lend money for owner-occupied properties or properties being used for personal or household use. Hard money loans are designed for distressed properties and are used by investors looking to buy and renovate, either to flip or refinance and keep as a rental.

Loan Term

Most conventional mortgages have interest rates that are fixed for 30-years, and are fully amortized. Hard money loans are interest-only and typically have a term of 1 year or less.

If you are wondering how to get a hard money loan, Investmark Mortgage is here to answer your hard money lending questions. We are one of the most respected names for hard money loans in Texas and we’d love to share our expertise with you, so contact us today!