If you’re new to the game of real estate investments, then you’re probably aware of some terms that can be quite confusing. One of the loans that can confuse a lot of newbie real estate players is hard money.
Hard money lending is a method of borrowing money that doesn’t use traditional mortgage lenders. These loans come from individuals or investors whose money is based on the property you’re using as collateral. Basically, these lenders lend you money based on securing your collateral.
This type of lending gives the lender lower risks, knowing that as long as your collateral is there, they won’t be losing any money. So if you’re unable to pay, they can easily take the appropriate action to take what is due.
If you want loans to happen quickly and need to avoid lengthy processing, or when a traditional lender denies a loan, hard money can be your only option. But before you jump on hard money lending, it pays to know what it really is and how it works. Let’s take a look!
What is Hard Money Lending?
If an investor wants to finance their real estate projects and opt not to use traditional mortgage practices, hard money lending is a great option. It’s a short-term loan that secures the private investor instead of relying on traditional institutions, such as credit unions or banks.
This type of lending is often used by investors who want to make major changes in their properties and sell them. The great thing about hard money lending is that you can get it in a matter of days, as opposed to weeks from traditional institutions. This is what makes hard money lending a fantastic choice for real estate developers and house-flippers.
Hard Money Lending vs. Other Types of Lending
The most significant difference between hard money lending and other types of loans is that hard money lending doesn’t focus on your credit history or income. Instead, investors or lenders will look at your property’s value, and from there, will determine after-repair value.
Here are other ways hard money lending is different from other methods:
- Hard money lenders don’t invest in primary residence because owner-occupied properties are subject to various regulations, increasing the risk for lenders;
- Hard money lenders use their own money or raise it from a group of investors. This amount is based on the property and the risks they’re willing to take.
- Hard money lending is a short-term loan and won’t give you the luxury of 15 years to pay; instead, you’ll need to repay your lenders within six to 18 months.
- Lenders have their own lending criteria and requirements. This means they’ll have their own upfront points, interest rates, and durations.
Fortunately, there are reputable hard money lenders you can speak to, such as DFW Investor Lending, to learn more about this type of lending. Additionally, you can apply for a hard money loan on their website to kickstart your real estate property project.
How Does Hard Money Lending Work?
- Find a hard money lender near you like DFW Investor Lending.
- Schedule a meeting with your lender and ask them about their real estate expertise. During this time, you should also assess the timeframe of the loan.
- Make sure you’re offering a good deal and a solid financial plan. Once it’s ready, you can create a contract.
- Ask the lender for trusted appraisers and get your property appraised.
- Wait for your hard money lender’s approval and their payment terms.
- Consult with a lawyer and close the loan. Note that there may be additional costs for closing fees and property insurance.
The Bottom Line: If You Want Quick Cash For Your Real Estate Property, Hard Money Lending is a Great Option
When you want to loan money for your real estate property, it’s no lie that it may take too much time if you seek assistance from traditional institutions. Fortunately, with hard money lending, lenders will be able to loan you money so you can start improving and funding your real estate property.
How Can We Help You?
The loaning process in traditional institutions can indeed be daunting and long, but that shouldn’t be that case. Our team of professionals at DFW Investor Lending, LLC can help you with your loan needs.
We offer competitive hard money lending rates that will help fund your real estate rehab projects. Our qualified team can assist you with all your real estate needs. Apply for a hard money loan today!