Investing in real estate is always a good idea. However, if you don’t have the money upfront, you will need to take out a loan. The thing is, conventional loans can be a lengthy process and strict adherence to approval criteria. This is where hard money loans come in.
Hard money loans are acquired through a private lender. The catch is, they need to be backed by an asset. Moreover, compared to a conventional loan, a hard money loan has shorter terms with higher rates. So, if you’re investing in real estate and you’re considering a hard money loan, your collateral is the asset you’re buying. In turn, this reduces the risk for the lender and yourself.
How It Works
Now, let’s dig deeper into this type of loan. It’s a great loan if you don’t want to go the traditional mortgage route. Here, the money will come from investors or individuals who lend funds based on the property that will be used as collateral.
In this case, you don’t need to worry about proving your ability to repay the debt or your credit score. Since hard money loans require collateral, the risk is lower, which means it’s likely you’ll get the loan you need for your property.
Generally, hard money loans are short-term loans that can only last up to three years. It’s quick money you can use to get the property you want. That said, it’s not the best loan to get if you want to pay longer because the rates tend to be higher, which may not be a wise financial move.
Is Hard Money Loan Right for You
Similar to other types of loans, the right loan will depend on your circumstances. In this case,a hard money loan may be an ideal option if you can’t get traditional funding and need quick money. A hard money lender won’t spend a lot of time going through your application, verifying your income sources, or reviewing your bank statement.
In short, the process is easier and quicker. Furthermore, if you already have a good relationship with the lender, the process can even move more quickly—next thing you know, you already have the property you want.
How to Get Hard Money Loan
There are a lot of institutions that offer hard money loans. You can also ask local real estate agents and investors for referrals. When you have a handful of names, reach out to them, discuss your needs, and establish a relationship so you can fund projects quickly.
Like getting other types of loans, shopping around is crucial to ensure you get the best deal. Doing so will help you find lower rates or negotiate different terms with different lenders.
Hard money loans are often used in the real estate industry, specifically with investors who are fixer-uppers. Flipping homes require quick turnarounds that make hard money loans suitable. Do you think it’s the right one for you? Reach out to an expert to help you make the right financial decision.
Get your hard money loan today! Shannon Christenot is one of the best mortgage lenders in Los Angeles. You don’t need to worry too much about qualifications—we can make it happen for you. Get started with us; call us at (818) 601-2231 today.