What Is A Hard Money Loan?
In simplest terms, hard money loan is a type of asset based loan financing wherein the borrower gets funds that's secured by real property. Typically, hard money loans are being issued by private companies or investors and the rate of interests are often higher compared to traditional residential or commercial property loans. This is because of the reason that it has higher risk as well as short duration that come with the loan.
A big portion of hard money loans are utilized for projects that are lasting for months to years. As a matter of fact, this kind of loan is much like a bridge loan which has same criteria usually for lending and cost to borrowers. The main difference however is, hard money mortgage loan is often referred to commercial property or perhaps, investment property that may be in transition and does not yet qualify for traditional financing while the hard money refers not only to asset based loan with high rate of interest but potentially distressed financial situation similar to arrears on existing mortgage or where foreclosure and bankruptcy proceedings occur.
Hard money lenders always care on the property and ensure that they're in a strong position and is less about borrowers. Documentation of income - as a matter of fact, this is quite a popular reason why there are a lot of borrowers who are applying for hard money mortgage loan. And much like to bad credit, it may be hard to get financing if you can't prove your income. As for the borrower, they have to deal with losses from investments few years ago and they're still writing off recent tax returns.
But with hard lenders however, they actually care less about the income of the borrower and know that self employed debtors usually have more income than what they can show. Financiers of hard money want to see a solid deal and money in the bank. The lender will only do the deal after the conformation that the payments to the loan would be made according to the cash that the borrower has.
Timing - this is another known reason to why people are working with hard lenders. Deals could get done quickly and in fact, they can also be done within days. This timing option can make the offer stronger for buyers and having quick access to cash give buyers confidence to make plenty of low offers.
Comfort of doing business - in reality, it is a lot harder to get approval from conventional financing even if you're qualified for it. The underwriters keep on searching for ways on how they can reject the loans and as a result, it takes a while and requiring lots of documents. As for hard money lenders, it is easier to work with them and not trying to kill the deal even though they look at the same documents. Continue your reading at http://www.huffingtonpost.com/jack-m-guttentag/why-small-home-mortgage-l_b_7309404.html.