Friday, September 16, 2016
Hard money loans are generally acquired by borrowers who are looking to capitalize on real estate opportunities and are lent by private investors rather than traditional process of banks. These loans work best for borrowers who do not have an adequate level of credit score to qualify for a loan from the bank. Let’s not forget that finding a reliable and trusted hard money lender is equally important as it is to utilize the loan for a real estate opportunity.
1.Research Appropriate Lenders in Your Area
When being rejected for a loan from a bank, it is quite normal for borrowers to get their hands on the first hard lender they come across in order to quickly acquire the loan. It is advised to resist the rush and conduct a patient research first. There may be some lenders who might be sincerely interested in your project but others may be a little more than just some loan sharks. So before finalizing a potential lender, ask yourself the following questions:
•How well is the lender with his or her investors? Is the lender currently running through any major lawsuits from its investors pertaining over bad loans or foreclosures?
•Does the lender have an authentic website? Do note that some lenders have websites that tend to collect information only to forward it to a third party. Avoid such lenders.
•The lender has financed which type of projects in the past? For instance, a lender who has a record of financing engineering projects may not feel confident in providing loans for a real estate project due to its diverse nature and complications involved.
•Does the lender have a fellow colleague you can contact? Some lenders do operate at national level, but its better you should prefer who has a proven record of operating in your local state. Many lenders are interested in seeing your property firsthand you are planning to purchase.
2.Identify the Benefits and Risks Associated with Hard Money Loans
A hard money loan is ideally designed for short-term investments with a general time period lasting for around 12 months. Ask yourself if you can refinance the amount back within the time period. Do note these loans charge high interest rates as compared to long-term loans, generally ranging from around 12 to 20%. Also note that they come with closing and other costs that borrower must bear.
3.Evaluate Your Loan’s Time Frame
These loans are normally granted much quickly and simply as opposed to bank loans with complex requirements. The bank’s loan takes longer due to considerations of information and underwriting process, whereas, the hard money lender will forward you the loan within two weeks. If you want to avail a real estate opportunity as quickly as possible, then hard money loans would be the most feasible option for you.