The property’s equity doubles as the lender’s security, which assures them that a foreclosure sale can repay the borrowed amount. The borrower can contribute to their equity through their down payment at closing or the long-term appreciation of their property. Here are three reasons a hard money lender will benefit your real estate investment:
Borrowing from conventional lenders like financial institutions often takes a lot of time, as banks and credit unions take a while to complete their underwriting. However, the real estate market is incredibly competitive, which means sellers are more inclined to accept offers with a much shorter closing period.
Hard money lenders fit into the picture because they can close much quicker than their conventional counterparts, as the application and underwriting process is less demanding. Since they can accommodate these everyday situations, real estate investors prefer their faster turnaround services.
While conventional loans are popular, they come with many restrictions that borrowers struggle to comply with, which is why hard money lenders are so popular. They usually offer more flexible terms and can even provide more creative lending options depending on their circumstances. Since conventional lenders typically take care of a high volume of loans, they must work within a rigid structure to provide more order.
If you’re interested in hard money loan products like the fix and flip loan and the bridge loan, then hard money lenders are the ones to ask. These loans allow borrowers to achieve their real estate goals on shorter, more flexible terms. For example, bridge loans usually last 6 to 18 months and require the borrower to fund 20 to 30 percent of the purchase price, and the hard money lender will fund the difference. Cash-out refinances also qualify as bridge loans.
Another aspect that many borrowers struggle with when applying for loans is creditworthiness. Although the rationale behind conventional lenders requiring high credit scores is understandable, it, unfortunately, restricts financing opportunities from well-meaning borrowers whose unfortunate circumstances gave them low credit scores. Luckily, hard money lenders aren’t interested in a borrower’s credit history or credit record because they want high equity in the property.
As many real estate investors are still recovering from foreclosures or short sales, which can take years, hard money lenders understand that it can take a while to bounce back. This scenario can stain one’s credit report and restrict their ability to apply for conventional financing, which is why hard money lenders are so popular.
While the cost of financing offered by hard money lenders tends to be higher, it’s worth the flexibility and other advantages that conventional lenders can’t provide. If you’re looking for a more creative financing solution that doesn’t involve your credit history, private money lenders are the ones to call.
