Hard money is money borrowed from non-traditional money lenders. In this case, you borrow money from individuals and investors who give you loans based on your collateral property. Anytime you need quick loans or have failed to get approval from traditional lenders, then you can always resort to hard money loans. That said, many would ask, how hard is it to get a hard money loan? find the answers below:
You Must Show Proof for Repayment
Like many other traditional lenders, hard money lenders would want you to prove that you can pay back their money. They will thus always ask you for your credit scores and the amount of your income that you would use to repay the loan. These lenders will also want to understand your borrowing and repayment history. They would want to know what your debt to income ratio is for them to prove you are responsible with money borrowed and that you can pay as per the terms of the agreement. With this basic proof, you can be sure upon satisfying your target lenders, your loan shall be approved in no time. Interestingly, in the hard money loan business, the value of your collateral worth matters more than your financial worth.
How Do You Find Hard Money Lenders?
While it is easy for anyone to access traditional money lenders, it is quite a task to know who hard money lenders are and where they are situated. Remember that money lenders differ in different places and some use your property value to approve your loan. There are others in Massachusetts that use the loan to value measurement while some basically use your borrowing and repayment trend and others use your minimum credit score. Some hard money lenders in MA can be found by attending your local real estate investment group meetings, asking around, or even searching online for them. You simply hook up with them online, you make your transactions online, and seal your deals online. Ensure these lenders are credible and reliable. Also, you can ensure if the terms are feasible for you in the long term or not with the help of hard money lender calculator.
What is Your Collateral Worth?
Please keep in mind that hard money loan lenders have little interest in your ability to repay your loan. They will easily sell your property and recover their money. Be sure you are willing to take this risk of your property being sold when your repayment period lapses and you will not have repaid your loan fully. You should also remember that hard money is often short-term money. Delay repaying means an increase in the amount of interest you will pay. Interest rates for hard money are also higher than the traditional loan interest rates. Ensure you have a serious need before you opt for this borrowing mode.
How Soon Do You Need the Money
Are you in a hurry to get some money for your real estate gig? If your answer is yes, then it is easier for you to have access to hard money loans compared to traditional loans. Hard money deals are easily closed as the lenders do not have to spend their time going through your bank statements and counter checking your income. You only need to develop a relationship with the lender and you have your loan approved.
In case you are dealing with an individual lender, it can be much easier. For instance, he/she can understand what you are going through and allow you to extend the repayment period depending on how you will agree. It is non-bureaucratic. However, you need to have assets for you to qualify for a hard money loan because of the loan-to-value rates which are very low. A hard money loan is convenient for a short-term deserving need.
The Costs of Hard Money Loan
While it is easy to get your hard money loans approved speedily, they are quite expensive. Remember you must have an asset to place as security for your loan. Individuals without assets may not, therefore, qualify for hard money loans. You also must make wise investments using the borrowed money lest you will suffer huge losses. If your asset needs some rehabilitation, it may disadvantage you further as the hard money lenders will charge you for the rehabilitation cost. It would help if you rehabilitated your property before presenting it for valuing to ensure it
attracts a worthy value from your hard money lenders.
A hard money loan is not difficult to get for individuals who have assets. However, it is impossible for individuals without any assets to access these loans. The loans are easily approved and are the best option for people who need urgent money. A hard money loan is also a short-term loan and thus you must have a sure way to have an income flow to enable you to meet the loan repayment period.