Do you have a property in mind you want to buy but cannot because your bank is not approving your loan because of a poor credit score?
You can approach a hard money lender for a loan in such cases. They are private lenders who will give you loans against your property without any rigorous underwriting that banks require.
Why do Hard Money Lenders Sanction Loans Easily?
You might think there is some catch if hard money lenders are willing to provide you with a loan even if you have a poor credit score or other financial constraints.
Well, there isn’t.
Hard money lenders do not consider your financial history to sanction your loan. Their only concern is whether you make enough to cover the monthly payments and pay off the loan at the end of the stipulated period.
As security, they will hold your property—that is, the one against which you applied for the loan- as collateral. If you are sure that your immediate finances are in order and you will have no trouble making the monthly payments, then you do not need to wait for bank approval for your loan.
How do Hard Money Lenders Calculate the Loan?
Hard money lenders move quickly. So instead of checking your financial history or doing a background check, they will check the value of the “hard asset”, that is, the value of the property you want to buy and you will offer as collateral.
Hard money lenders will check parameters like the purchase costs, costs for repairs, taxes and fees to determine the amount of loan you can get.
However, you do need to remember that you need to bring in more cash to close a hard money loan successfully. For example, if you are sanctioned only 40% of the purchase price, you will have to bring in enough cash to make the down payment and cover the remaining 60% of the costs.
How Can You Obtain a Hard Money Loan?
Since hard money loan interests are higher than bank loan interests, and they have to be paid off within a couple of years, the monthly payments will be significantly higher than that of a bank loan.
However, a hard money lender will ask for details like the purchase contract of the property you intend to invest in, your documents for tax returns, rehab budget, and identity proof, and you may offer proof of income if you want to. They may also require legal formation documents and operating agreements if you work under an entity. Once they have verified the documents and you consent to the monthly payments, the loan is sanctioned.
GW Private Capital, Inc., Private Hard Money Lenders, prides itself on providing hard money loans quickly compared to conventional financial institutions.
We are very flexible while working with our clients, and whether you want to flip a property or invest in one for personal use, we will help you acquire it. We give individual attention to our clients, and with over three decades of experience, we close loans faster than ever.
Contact us today if you need quick financing or real estate advice, and our experts will help you improve your portfolio like never before.