There are several types of loans. Some require you to have a good credit score before applying and being approved, and some require collateral. A hard money loan is a type of loan that you can secure with your property instead of your creditworthiness. This term was coined in the 1950s. Unlike other types of loans, hard money loans are based on property assets, not credit. This type of loan is usually used in real estate transactions. However, banks do not offer hard money loans. Take a look at how you can apply for a hard money loan.
Reasons for Applying for a Hard Money Loan
There are several reasons why one would apply for a hard money loan. For instance, you might want to buy a new house before you sell the one you have. With a hard money loan, you can use your existing property as collateral and get money to pay for the new property. In addition, hard money loan funds are issued instantly, so you can also depend on them when facing foreclosure. Another reason why people go for hard money loans is for buying investment properties and flipping houses.
The Difference Between Hard Money Applications and Other Loans
One of the main differences between applying for private loans and other types of loans is that you can use your house to secure the loan with a hard money loan. This means that these loans are available for people without a good credit history. Also, because of the fewer requirements, you will be able to get money faster when you apply for a hard money loan. The advantage of a hard money loan application process is getting money when you need it.
Hard Money Loan Application
The first thing to note about a hard money loan application is that your creditworthiness does not play a role in the qualification process. However, there are several factors that a lender will consider before they approve you for a loan. These include the following:
- Your home equity
- Debt-to-income ratio
- Loan-to-value (LTV) ratio
Once these factors are worked out, the hard money loan can be issued quickly. However, because of the higher risk the lender will be taking, these loans usually come with a higher interest rate than other types of loans.
Here are some of the documents needed to apply for private loans:
- Purchase contract
- Preliminary Title Report
- Two Forms of Identification
- Proof of funds statement
- Proof of Insurance
Applying for private loans is not too difficult. The application process is faster since there are no background credit checks.