If you’re in the market for real estate to invest in you have to move fast. You’re on a short timeline if you want to close the deal of your dreams.
It can take anywhere from 30-60 days to get approved for a loan. By that time, the property won’t be there. So what do you do?
If you’re short on time and short on credit, a hard money loan may be the answer you’re looking for. Find out the basics of how these loans work so you can decide if this is the best option for you.
What is Private Money Lending?
If you’ve heard the term private money lending or hard money loans you may have a misconception of them. Private money lenders are individuals who loan their own capital to other investors. The loan uses the real estate as collateral.
Aside from the private aspect, it may sound like a traditional bank loan but there are many differences. Private lenders approve loans faster and have shorter terms than traditional banks.
What is Hard Money?
Hard money doesn’t mean it’s harder to get. Quite the contrary, private money lenders use their own terms so there isn’t the hassle of getting approvals from committees and several departments. Private lenders are the committee!
Every lender makes sure the borrower can pay the loan. Banks require proof of a low debt-to-income ratio and good credit. But they care about your credit history, not only the score.
Hard money lenders base the loan on the collateral securing it. If a borrower can’t pay, a hard money lender takes the collateral and resells it. A hard money lender cares more about the value of the collateral then the borrower’s credit score.
That’s not to say that collateral is all they care about. There’s still a process of paperwork but it’s not as nit-picky as a bank’s. There’s no standard underwriter so every loan application gets screened on an individual basis.
Hard money loans are more flexible. You can work with the private lender on terms and repayment options, unlike a traditional bank.
Should I Use a Hard Money Loan?
Hard money loans are a great option for many people, not only investors. These types of loans benefit people who:
- Are buying a fix and flips
- Are investing in land
- Need a short-term loan for construction
- Has bad credit or credit issues
- Needs to act in a time sensitive manner to secure an investment deal
The most important key is to find a private money lender who is right for you.
We Help You Find Fast Funding
Understanding private money lending and how it works can seem confusing but we make it easy. At Hard Money Georgia, we are direct private real estate lenders.
Our experts are on hand to answers your lending questions. Contact us today and get your loan proposal with no upfront fees and no pre-payment penalties.