Hard Money Loans made by private investors are one of the best sources of financing for investors looking to take advantage of the great prices in California's residential housing market and throughout the united states.
With attractive terms and rates on one to four unit homes, they make it possible for you to purchase great opportunities even in today's constrained lending market. Here are 10 things that you should know about these exciting financing products:
10 Facts About Hard Money Loans
- Hard money loans make tough transactions possible. When you have a slam-dunk transaction that will not pass muster with a bank, they are your best option.
- They are less expensive than you think. While hard money typically costs more than a bank loan, most borrowers can get loans at very favorable rates and terms. Given the returns that most real estate investors expect to make from properties bought with hard money, the loan is quite inexpensive.
- Cash reserves matter. Most private lenders want to ensure that you have enough money to service their loan, no matter what.
- Private loans can be used for construction and rehab financing as well as for straight purchases.
- Hard money loans are fast. You can expect your loan to close in days or weeks instead of months. While loans usually take two to three weeks to close, three day closes are possible.
- Hard money lenders are flexible. Since they are private individuals, they can frequently structure loans creatively to meet your specific needs.
- Flips, rehabs, and other distressed property transactions are not a problem. If they will make you money as an investor, they are a perfect opportunity for a private lender.
- Access to private mortgage loans makes it easier for you to get the best deals. Being able to buy with no loan contingency or with a very short loan contingency makes you a much more attractive buyer to the sellers of distressed property with a great deal of upside.
- Hard money loans are available for 30-year amortization periods or, in the case of short term loans, on an interest only basis. This frees up more cash flow for you to use to make other investments.
- Private mortgagers are usually more worried about your character than your credit score. While you must be credit-worthy, most private lenders will not immediately dismiss you on the basis of your FICO score alone.