There are plenty of loans that people are welcome to apply for. While there are the more well-known ones, such as the FHA, there is one, in particular, that is somewhat popular but not always advertised: the hard money loan.
What is a Hard Money Loan?
Also known as a “bridge loan,” this type of home loan can be obtained by anyone without the worry of credit scores or income level judgment. As long as you make payments with the interest rate included, you can get total ownership of your home within months. The collateral is the property itself, which means you could lose the house if you don’t pay up.
Characteristics of a Hard Money Loan
Credit Score is Not a Concern
Conventional loans take a closer look at your credit to approve your loan. This is to determine whether or not you’re capable of paying them back. Typically a credit score of 620 can win over a loan company. They also factor in your DTI and how consistent your employment history is.
Most companies want to assure themselves that they can get their money back, but not every household has good credit. And basing things off income level may not be fair. After all, everyone deserves to have a roof over their head no matter how much they make.
The good thing about hard loans is that they don’t look into your income or credit history. The agreement is solely based on how consistently you can make payments, and the risk is based on the property.
Flexibility is a Perk
Unlike traditional loans, hard money loans are also flexible in nature. Every set of terms and conditions is based on each individual. Lenders consider each client’s capability to pay the loan back, and depending on the lender, terms are negotiable rather than fixed. These loans can also be issued within days.
Speedy Timeline of Payment
The approval process isn’t as long as a typical FHA or mortgage loan, so these are often issued much faster. The payment of these loans is also just as fast. Instead of years, most lenders may require you to pay back in a matter of months.
High Interest Rates
Because of the lax terms and no concern over credit scores, the interest rates of hard loans are a lot higher than a regular loan. This factors in the risk that creditors are making because they have no reassurance that you can pay them back except taking your word for it. Conventional loans often range at a 4–5% interest. For hard money loans, it is possible to see a rate of 10% or higher.
Hard money loans have been around for the longest time and have earned quite a reputation. Because of so many shady and predatory lenders back in the day using the term, the hesitation towards it is quite understandable. But if you’re a responsible enough person to take one out for the sake of acquiring a great deal on a home, you shouldn’t feel intimidated towards it. If you approach the right lender, you won’t regret taking one out.
To get a good deal, you need to turn to a reputable hard money lender in Fort Worth. DFW Investor Lending, LLC is owned and operated by expert investors and residential real estate appraisers. With thousands of projects under our belt, we are some of the most experienced and qualified professionals you can trust. Contact us today!