Plenty of people take out hard money loans as opposed to your traditional bank loans. Hard Money Loans are easy to obtain, and can be processed in a day, whereas a traditional bank loan can take over a month. Hard money lenders can still provide funding if the borrower has issues such as low credit scores, no income history or recent foreclosures, loan modifications or short sales. These issues would keep a traditional lender from giving out a single cent, but as Hard Money Loans are easier to receive, they do have some requirements. Keep in mind the rate will be higher, but is an option many don’t consider.
First off, you need a down payment. Many hard money loans are denied because the borrower lacks funds he or she needs to purchase the property, or they don’t have enough equity in the property they currently own. If you expect 100% financing you’ll be laughed at. Most hard money lenders expect the borrower to have somewhere around 30% equity invested before the loan is even considered.
Secondly, make sure you have enough money to make the monthly payment. This is usually common sense but plenty of people think they can get around this. Your lender will analyze your potential to make payments. This means you need to prove good income, and at least some money in the bank. If you’re short on cash, you may need to partner up with someone who can prove reliable income. Otherwise your loan won’t be approved.
Lastly, make sure you have an exit strategy. Hard money loans are typically for short term uses, anywhere from one to three years. This means the remainder balance will be due at the end of the term. A good exit strategy will typically be needed to pay off the remainder of the loan, and many lenders will want to know what this plan is up front. An exit strategy could include: selling the property, selling a different property, refinancing the property with a conventional loan, and even refinancing with another Hard Money Loan.
It’s not terribly uncommon for a person to use a hard money loan when their credit is a mess. Hard Money loans can help you get on your feet while your credit recovers so you can actually be qualified for a conventional loan. As long as you keep these tips in mind, you’ll be that much closer to a hard money loan approval.
So if you’re curious about a Hard Money Loan, don’t hesitate to call National Realty Group at (800) 406-9606, visit us at NationalRealtyGroup.com or stop by our office. We’ll set you up with an agent who will answer all the questions you have and help you on your way to a loan.