What is a hard money loan? What are the usual purposes of a hard money loan? How what are the terms of a hard money loan? What kind of credit score do I have to have? This information we will be covering in this article. The hard money funding business started in the late 1950s when the country’s credit industry underwent drastic revisions and changes. Most hard money lenders are investment-type firms.
What Is a Hard Money Loan?
A hard money loan is a type of investment that actual property backs the security of the investment type loan. Hard money loans typically have a higher interest rate and shorter period loan terms. Usually, hard money loans would not qualify for traditional type financing.
How Is the Loan Amount of a Hard Money Loan Determined?
The amount of funding provided on a hard money loan typically can be determined by two factors; the loan amount divided by the actual value of the property. To the person requesting the hard money loan, most hard loan lenders will lend from 65% to 75% of the property value.
Requirements for a Hard Money Loan
Most candidates for hard money loan cannot qualify for conventional funding or need the funding quicker than a traditional type loan can provide. Whereas traditional type loans can take weeks to process and approved, hard money loans only take a few days to be prepared, approved, and funding granted. A candidate’s credit score does not play in the loan qualification requirements. If you meet these qualifications, then a Nashville Hard Money Loans may be of interest to you. Hard cash loans are viable alternatives for persons who do not qualify for conventional type loans.
Investors who buy properties, do renovations on the properties, and then resell them for a profit are called property flippers. With investors who deal in property flipping, they need cash quick. By having cash on hand, renovations are completed, the property sold, and the hard loan paid off, along with any profits yielded from the sale.
Borrowers Not Qualified for Traditional Type Financing
There are many issues in which a potential homeowner could not qualify for a 30-year fixed-rate conventional mortgage from a bank. Divorce, insufficient income documentation are just some examples that a traditional mortgage would not meet qualification criteria. Also, self-employed applicants sometimes can afford a typical property mortgage; however, their taxes are not actual examples of their income. In those situations, hard money loans are their only options.
Property Owners Facing Foreclosure
Unfortunately, sometimes a property owner can have a massive amount of equity in their property and still risk foreclosure. Hard money lenders will lend money to property owners risking foreclosure under specified terms. These terms are typical if the mortgage goes into default, the hard money lender can sell the house, pay off the first mortgage, and still after these obligations met, can earn a profit from the sale.