Those who invest in real estate are generally familiar with a hard money loan. Most Los Angeles Hard Money Lending Companies will tell you that hard money refers to a way to borrow money that does not usually use mortgage lenders.
Los Angeles Hard Money Lenders say the reason that you can’t generally use traditional lenders for many real estate investment transactions is that the loan needs proof that you can repay it.
Los Angeles Hard Money Lenders for regular mortgages go through your income and credit scores and other financials to figure out if they think you have the ability to pay the loan back. If so, you get approved. If not, you get rejected.
Due take into consideration that a hard money loan financing usually comes from an individual or an investor who lends money based upon the value and potential of the property you are borrowing it for.
The choice to lend is based upon the collateral that secures the loan, and they are not as concerned about your ability to pay.
If you do not pay the loan, the Los Angeles Hard Money Lender simply takes possession of the property and sells it for as much as possible.
Most Los Angeles Hard Money Lending Companies will tell you that hard money loans are generally easier to get than traditional mortgage loans, but in most instances, the mortgage rates are much higher.
In the past, you simply could pay a 14% interest rate on a hard money loan with bad credit.
Los Angeles Hard Money Lending Companies say that today, there are a handful of private mortgage lenders that offer high risk money loans with more reasonable interest rates and terms, but it’s still usually a bit higher.
Here are some signs that you might be in the market for a hard money loan:
You Need Money Instantly
When you are investing in real estate, most of the time, Los Angeles Hard Money Lending Companies say you may lose deals if you wait months to be approved for a loan. Hard money loans are designed and focused on the property, not your finances, most of the time.
A handful of hard money mortgages and home loans for individuals with horrible credit can close in less than two weeks. If you are a routine user of hard money loans, the process can move a bit quicker.
This can be very advantageous when you are dealing with a property with multiple offers. Los Angeles Hard Money Lenders say that often the guy with the fastest cash offer wins.
You Need Flexibility
Most Los Angeles Hard Money Lending Companies will tell you that hard money loans are more flexible than conventional mortgage contracts. In addition, Los Angeles Hard Money Lenders are not using traditional underwriting. Instead, they run the numbers on every deal separately.
Now depending on the deal and your scenario, you may be able to adjust how long you borrow the money for or the interest rate. Most Los Angeles Hard Money Lenders are not huge companies and there is more negotiation involved in some deals.
You Need an Approval But Have Bad Credit
The essential factor for the Los Angeles Hard Money Lender is the collateral. Our Los Angeles Hard Money Lenders say if you are buying a real estate investment property, you will be able to borrow as much as it is worth. At times, finding a Los Angeles Hard Money Lending Company for bad credit can be hard if you don’t know where to look.
You Have Cash Available
It is a rare hard money lender that will loan all of the money to you that you need. Usually you have to bring some cash to the table.
The maximum LTV usually is not more than 80%, meaning you have to bring 20% to the table. This assures the lender that they can sell the property fast if you don’t hold up your end of the deal.
You Desire Money For A Short Term
You’d have to be out of your mind to pay 14% interest on a loan for years. Most hard money loans are short term, typically three to six months, with an option to extend. Many real estate investors use hard money loans to flip properties.
They buy the home under market value, do a certain amount of repairs, and then sell the property for a profit. In some cases, the property may sell in just a month or two.
Most of the time, our Los Angeles Hard Money Lenders say it can take six months or even longer. If you need money longer than a few months, you may not want to get a hard money mortgage or a home loan for individuals with bad credit.
And these loans hardly work well for long term buy and hold; the interest rate is just too high.
You Want To Use Other Individuals Money
There are real estate investors who have an endless amount of money of their own available and can do deals in all cash. Nonetheless, they still may choose to use hard money to do some deals.
While they do have to pay interest costs, less of their own capital is tied up in one specific deal.
Los Angeles Hard Money Lenders say there are a handful of scenarios where getting a hard money loan for people with bad credit is the best way to move forward on a real estate deal.
If the deal needs to be funded right away and you lack the cash to do it all yourself – or you don’t want to – hard money can really work well.
Overall, most Los Angeles Hard Money Lending Companies will tell you that as long as you are not holding onto the loan for too long, using hard money can aid you in making a lot of money in real estate.