Is a Hard Money Loan Right for Me?

There are alternative mortgages options to banks or traditional financing sources. Private mortgages or hard money loans are loans that are funded by private individuals or private money lenders for real estate. Private mortgages fill a need for borrowers and properties that might not qualify or fit within the loan guidelines of traditional lenders. Private mortgages are not credit and income based, they are based primarily on the equity in the property. Private mortgages have higher interest rates and the loan costs are higher but the main benefits of private mortgages are how easy they are to obtain.

How Else Do Hard Money Loans Differ From Traditional Loans?

Private mortgages are ideal for borrowers who have been turned down by a traditional lender because of income or credit and they are also used by real estate investors who need to perform quickly. Private mortgages can be closed within days where traditional loans require weeks or longer to finalize. Sometimes the property because of its condition will not meet the standards of a bank or traditional lender and private lenders are not as concerned about the property’s condition. The documentation required for a private money loan is minimal and the loan process is streamlined. Private money may be used for a myriad of purposes, purchasing a property, refinancing or pulling cash out of the equity in a property. Private money loans can be as small as $30,000 and may be second or third lien positions.

Is A Hard Money Loan Right For Me?

If you have plenty of time, can provide the lengthy income documentation, you meet the debt to income ratios, have the minimal credit scores and can furnish a list of many other loan conditions, then a traditional loan may be better for you. If you can obtain a traditional loan, take advantage of the better terms, lower interest rate and much lower payments. If your credit is less than perfect or you need capital in days, a private money loan may be a great option to obtain fast and easy financing. Private money loans fill a need in the real estate market and are incredibly beneficial for the right borrower and circumstances.

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