Hard money lenders often get a bad rap because of the seeming “shadiness” of the dealings by a select few. In reality, the vast majority of hard money and private money lenders are reputable individuals who actually want to help borrowers that need some money to get through a rough patch. While not many people realize its usefulness, it’s time to dispel those myths and let potential borrowers know that hard money lenders are a good option.
To help in that regard, here are some facts about hard money lenders and why it’s a good option for the average borrower.
The “hard” in hard money lenders refer to the difficulty of your situation
Technically, it’s not that difficult to get a hard money loan—but the circumstances of needing to borrow hard money mean you’re in a difficult position. If you have a history of bad credit and you’ve tried multiple times without success to obtain financing, hard money may be your only option!
Hard money often comes into play when the loan is taken out to deal with delinquent mortgages, foreclosures, and bankruptcies.
Hard money lenders are legitimate business owners
Hard money lenders are no different from banks—in the sense that their business is all about lending money. They are run by LLCs, S corps, or sole proprietorships with a clearly defined business structure and sound investment strategy. The only difference they have from banks is they can lend you money without the bureaucracy and strict federal guidelines that banks tend to have!
Hard money loans have a simpler application process
Whenever you apply for a conventional property loan, your credit score will be scrutinized and investigated by the bank or lending institution. On the other hand, hard money loan applications are simpler because of the absence of complex bank regulations. The lender will instead ask for more borrower equity to secure the loan. Once you’re cleared of that, approval takes more or less 24 hours and a 10-day closing period!
Hard money lenders fund investments that have higher chances of success
Like any other institution with money involved, scams are bound to come up every now and then. Contrary to popular belief, hard money lenders are not approving applications because they know you can’t pay them back so that they get your collateral. It is also in the best interest of the lender to protect your investment as well as theirs.
Hard money is not 100% financing and 0% scrutiny
Although hard money loan approvals are simpler than conventional loans, it’s wrong to think that the lenders will approve just about anybody. Even if they don’t look at your credit score, lenders will be hesitant to approve someone who will just walk away with the money! Because of the loans’ high-risk nature, lenders are actually much more wary and vigilant with who they deal with.
Conclusion
A real estate lending application can be a stressful and complicated process, especially if you have poor credit and no equity. Finding a hard money lender may be just what you need to help you get out of an impossible financial situation like this.
Hard money loans are perfect for short-term financing projects and for preventing a looming foreclosure. They may not be ideal for every situation, but they can be beneficial to you and your lender if you know where to find one!
Turn to a reputable lender to help make your deals more profitable than ever. DFW Investor Lending, LLC is the number one hard money lender for DFW real estate investors. We have loan programs for first-time investors or seasoned professionals who need to secure legitimate and profitable deals. Get in touch with us and apply for a loan today!