Bad Credit? Hard Money Loans Elevate You to Home Ownership.
Rejected for a Traditional Loan? Hard Money Loans Dispel Rainy Days Giving Buyers a Second Chance.
Hard Money Loans
There is always one type of home loan that is a best option for buyers with specific needs. Hard money loans have a cross-appeal for different types of borrowers. Simply put, a hard money loan is a short-term loan secured by real estate and funded by private investors as opposed to conventional lenders like credit unions or banks. Hard money loans have a typical term of 12 months, but extended versions have been known to stretch out to two to five years. Interest-only payments with some principal are required, and you can expect a balloon payment at the end of the term.
The property’s value is what hard money lenders focus on, versus the borrower’s credit. Buyers who have had recent short sales or foreclosures would be eligible for hard money loans so long as there is enough equity in their collateral property. While the banks are shaking their heads and pointing to the exit, hard money lenders are nodding and beckoning for the borrowers to come sign on the dotted line. Hard money loans are a different breed of animal and you really need to know how they work so you can shop them appropriately. Be sure to learn more about hard money loans, and call Diditan Financial to help pair you with an ideal short-term cash solution.
Residential Hard Money Loans
Most hard money lenders have a specific niche when it comes to hard money loans, and the most common is residential. This can be a single family dwelling or a multi-family property. Most residential hard money lenders fund in the first lien so that if the borrower defaults on the loan they are the first in a line of creditors to be handed remuneration. In some instances a lender will kneel before a mezzanine loan–an initial junior lien to define the first position of the loan.
Your hard money lender will take the quick-sale value of the property and structure the loan based on its percentage. This is called a LTV ratio or “loan to value” that rests between 60 and 80 percent of the property’s market value or “today’s purchase price”. This is a reasonable sum the lender could garner in the event the home defaults and must be sold within one to four months.
Commercial Hard Money Loans
Commercial hard money loans deal with non-owner occupied properties posing significantly more risk to the lender than residential hard money loans. Also known as bridge loans, commercial hard money loans offer shorter terms. A commercial hard money loan is similar to a residential hard money loan in that both operate on loan-to-value principals. A commercial hard money lender is typically a strong financial power with massive deposit reserves and can make fast judgments on non-conforming loans. Standard guidelines do not apply in commercial hard money loans, and often there is situational hardship such as the borrowers facing financial hard times, or the property might be stuck half way through the construction phase. The structure could also be lacking various permits.
There are many financial investment groups that operate under the radar to merge into a joint venture or sale-lease back obligations to those red flagged transactions that have the highest chance of default. In some cases these investment groups will use hard money loans to hook the buyer back into buying his property within a set time period. In the event the borrower fails to pay on time, the property would be kept by the lender at the previously agreed price.
Commercial hard money loans are high-risk and have mammoth failure rates. As a property owner if you default on your loan, you could lose your building to foreclosure. However, if a past bankruptcy looms over your head like the Sword of Damocles, then a commercial hard money loan may be the only chance to own property. Just be advised that you may not qualify for bankruptcy protection, given the high-risk nature of the loan and your past credit.
Should I Get a Hard Money Loan?
If you have great credit, no foreclosure, and no short sales then you should go for a traditional mortgage and avoid a hard money loan. If, however, you have a less than flattering credit score and have been turned down by traditional lenders, our Diditan Financial team can help you get a hard money loan with the best terms possible given your predicament. The economy has had its ups and downs, and predatory lenders have taken advantage of people while deceivingly holding their hand as their credit was demolished. Your dream of being a homeowner should not be denied just because you made some poor decisions in the past when taking our your first home loan. Contrary to buyers with credit challenges, there are occasions when people with ideal credit will seek hard money loans as their best option. For example, if you are an investor and need the money quickly to get in on a land investment, a hard money loan would be ideal. Another appropriate scenario would be if you were flipping several units in a building and needed them all completed by a set time in order to meet the demands of a real estate deal–hard money loans give you fast cash so you can pay your contractors and get the renovations done quickly in order to flip and sell the property on time.
How do I Find a Hard Money Lender for Land?
Finding a hard money lender for a land loan is difficult to do on your own. You can scan the Internet browsing multiple private hard money directory lenders, and have no way of knowing that the person can actually help you get the money you need to fund your investment. Diditan Financial has been helping land developers and various investor types pair with ideal lenders to get the quick cash needed through the best private money loans. Our financial planners serve clients by being that comprehensive resource for borrowers fixed on securing land while undergoing an education on every facet of private hard money lending and loans.
When looking for a private money lender willing to finance a land deal, there are many things that need to be taken into account. Some of these include, but are not limited to:
- Location of land
- Type of hard money loan
- Area (i.e. construction loan, agricultural development loan, rehab loan, etc.)
- Bridge loan
Our Diditan Financial professionals will already know your portfolio and future dreams on a personal and intimate level. Then we interview a network of possible lenders looking for an ideal fit while truly serving as your financial vanguard in what is otherwise a very delicate procedure. Once we have assembled some prospects our team will coach you on how to interview the potential lenders so you can find that ideal fit that is trustworthy. Diditan financial removes all the smoke and mirrors; there are no hidden charges when you work with our lenders, and you can always feel confident knowing that we have your best interest in line with our sterling reputation.
Absolutely not! Conventional lending is not for everyone, and although it is by far the more popular route to take, it is still a mold that requires the perfectly-shaped borrower to fill and fit its requirements. In some cases hard money loans are the best options because they allow real estate investors with multiple projects on the table to leverage their cash so they can extend their reach and invest in multiple deals as opposed to just one. A hard money loan is a real lifesaver to various cohorts of borrowers.
How do I Make Payments on a Hard Money Loan?
Making payments towards a hard money loan might take you back to the 1970s–there are no fancy services like a website that helps you manage your payments. You will make your payments directly to the lender who will most likely keep a ledger card or some archaic software that doesn’t have Internet access. But who doesn’t love nostalgia?