It is important to understand hard money loans and hard money lenders. Once you have that information you can use this financial tool to your advantage when investing in real estate.
Chances are that you came across the term hard money lenders when you were researching different resources for funding a real estate purchase. And the fact is that the term hard money lenders simply means that the lender is not a financial institution or bank but instead a private lender. And this private lender could be an individual or a group of investors or even a mortgage broker who is supplying funding via personal money. But the most important information to remember is that this is a legitimate lender and not some shady backdoor deal that includes questionable legal aspects or methods.
The criteria that a hard money lender uses to determine if a loan request is granted is a bit different than what a conventional lender would use. A hard money loan is not dependent on the borrower’s credit history or creditworthiness as much as it is on the actual value of the property being purchases. The collateral for the loan is the property and as long as the loan is less than the current property value then the borrower should be able to get a hard money loan. And while that ease of financing is nice, there is a cost associated with it as well. Lenders are willing to take a greater risk than banks would take so they charge the borrowers a larger fee or higher interest rate than a bank would. In some cases borrowers will pay over 10% higher interest rates for a hard money loan.
The borrowers who benefit the most from the use of hard money loans are mostly investors. These short term loans are a great way for an investor to purchase a property, invest in renovations and then quickly sell the property for a profit. Building contractors also use these loans to purchase and flip properties for a profit. And in some cases investors will use hard money loans to purchase a property very quickly. This can be due to the time that is required to process a conventional loan. A great deal on a property can make it sell very quickly so financing quickly with hard money is a viable solution. The investor then refinances with a bank once they purchase the property.
A Solution for Bad Credit
Many times a person who has had credit issues in the past is not able to finance a home through a bank or conventional lender. But hard money loans are a great way for someone with prior credit issue to be able to purchase a home. It also allows the borrower to reestablish good credit.
A Legitimate Resource for Many
Hard money lenders are a legitimate resource for many different people. Not only can it offer a much needed loan to a person with bad credit but it is also a good option for someone who is interested in investing or flipping real estate. The key to getting the maximum benefit from a hard money loan is knowing the terms of the loan and ensuring that you will be able to meet the repayment schedule.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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