Last Updated on December 16, 2022 by Sapna K
Hard Money Lenders
What is a Hard Money Loan?
A hard money loan is what many in the industry refer to as a “last resort” loan. Meaning, when you have been turned down everywhere else for a mortgage and absolutely have to find the money to purchase the property. These are typically short term loans anywhere from 12 months up to 5 years.
What is a Hard Money Lender?
Hard money lenders will finance your property under less than optimal conditions but they will charge you a hefty price. These are private lenders and sometimes the money is coming from investors who need to see a return on their money. Here are just a few examples of what you can expect from a hard money lender.
- Interest rates that are much higher
- Upfront discount points of 2%-5%
- Short term payback requirements
- You may need to pledge other assets as collateral if your down payment is small.
When Would You Get a Hard Money Loan?
Hard money loans are popular for individuals who are going to be involved in a property short term. This could mean the following:
- Fix and flip homes
- Bridge loans
- Rental properties
- Commercial properties
- Almost any short term real estate need.
These are short term loans so even though the interest rate is a lot higher, you should not expect to pay that much more in actual dollars over the term of the loan. As an example, if you plan to rehab and flip a house over the course of 6 months, then you should hopefully still see enough profit in your deal to more than make up for the higher interest.
Other Hard Money Facts
- Hard money lenders are typically the direct lender. They are not a middle man
- They are not loan sharks. This is a safe loan product.
- You need to have a plan to get out.
- This is not a loan that you want to hold onto long term.
- Once you have done this successfully a few times, the lenders will be much more willing to loan money to you on future deals.
Pros and Cons of a Hard Money Loan
- Fast money for a short term project
- Fewer income and credit requirements
- Shorter time to close
- Typically less paperwork
- Sometimes an interest only option
- Much higher interest rates
- Up front points of 2%-5% minimum
- Shorter terms which means you need to exit or refinance the property within a couple of years.
Hard Money Loans FAQ
Q: How does a hard money loan work?
A: A hard money loan is a short-term loan with higher interest rates and is secured by an asset such as real estate funded by private investors. They are not Fannie Mae approved and the loans are not coming from local banks.
Q: What are the hard money guidelines?
A: The guidelines will vary by lender. Let us help you to get connected with one that matches your needs.
Q: What are the hard money interest rates?
A: The interest rates will vary by lender and also based upon your scenario. What you can be sure of is that the rates will be a lot higher than a conventional loan.
Q: Are hard money loan safe?
A: They are as safe as any loan, but you need to pay close attention to the rates and fees. Read all of the fine print to be sure you know what you are signing yourself up for.
Q: Do Hard money lenders require a down payment?
A: Yes, hard money lenders will require anywhere from 10%-35% down. However, that will also change your rate and some of the other terms.
Q: Do hard money lenders check your credit?
A: They are not concerned with your credit score but they will want to check to see if you have had bankruptcies or foreclosures.
Q: Can you refinance a hard money loan?
A: Absolutely, and in fact you should refinance OUT of your hard money loan into one from a traditional lender with a lower interest rate. That is, if you are planning to keep the home.
Q: Are hard money loans interest only?
A: They are often interest only since the plan is to keep the loan for a short time.
Q: Can I get a hard money loan with bad credit?
A: Your credit scores do not matter with a hard money loan.
Q: Are hard money lenders regulated?
A: Hard money lenders are regulated by the state and they must also have a real estate broker’s license.
Q: Are hard money loans available in California?
A: These loans are available in all 50 states. However, not every lender will lend money in each state. This is why you should let us help you to get connected with the best hard money lender for your scenario in your area.
Q: What is a fix and flip loan?
A: It is a short term loan where investors borrow the money they need to fix, rehab and then flip (sell) the home for a profit.
Q: How do I find a private lender?
A: They are not easy to find which is why you should complete our contact form and let us help you to get connected with one to have a free discussion.
We are able to help you to find a hard money lender in the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.