It would be fantastic if everybody had great credit, made lots of money, could prove it in order to qualify for bank loans. Sadly, it doesn’t quite seem to work out that way.
On the other hand, I bet you would be shocked if I told you 75% of my clients do have great credit & make lots of money and have FICO scores in the mid-700 range.
Then why the heck do they use my services. They want a FAST loan, they file taxes in a way that makes them look poor ( sorry can’t have it both ways), the property they are purchasing is in too poor of condition for a bank to finance.
These are the main reasons although there are many more. What is Hard Money? Hard Money is money that is obtained from private individuals, businesses or institutional funds to be used for real estate investments. Each Hard Money lender in California offers different terms but most of the critical components remain the same.
- Based on the value of the property
- Short Term (6 – 48 months)
- High Interest (9-12%)
- Points ranging from 2-5 (cost to get the loan)
- Quick ability to fund
- K. with property in substandard condition
How Hard Money Is Used: When real estate investors are unable to obtain normal bank financing, they will often use hard money as a “bridge loan” between purchasing and the resale or refinance. Very often, “fix & flippers” will use hard money to buy a property, fix it up, and resell it. Flippers very carefully calculate all costs to repair the home. The must also factor in paying the Hard Money mortgage payment while they have the home. Of course they must also factor in the loan costs to acquire the property in the first place. The loan costs become inconsequential when they stand to make better than average profits on the property. On the other hand, if it is a refinance, often times borrowers use Hard Money lenders to take cash of of one property to purchase another rather than let their equity remain in one place. How Do I Find Hard Money Lenders? Hard Money Lenders? Hard Money Lenders are easy to find.
- Look online. Any reputable hard money lender will have a website. Search Google for Hard Money Lenders in your state. Call two or three of them and pick the one you feel most comfortable with.
- Ask a Mortgage Broker – Many mortgage brokers help you directly or can connect you with Hard Money Lenders.
- Ask a realtor. Most realtors at one point or another have had one or more of their clients use the services of a Hard Money lender.
For more information on hard money loans, read our guide, or see our FAQ.
