Hard Money Lender .pdf
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Los Angeles Hard Money Lender
Hard money lenders are typically
private individuals or small groups
that lend money based on the
property you are buying, and not
on your credit score. Usually these
loans cost much more then an
average mortgage, often times up
to twice what a regular mortgage
does, plus high origination fees.
Hard money is a way to borrow without using traditional mortgage lenders.
Loans come from individuals or investors who lend money based (for the most
part) on the property you’re using as collateral.
When loans need to happen quickly, or when traditional lenders will not
approve a loan, hard money may be the only option. Let's review how these
What Is Hard Money?
Most loans require proof that you can
repay them. Usually, lenders are
interested in your credit scores and
your income available to repay a loan. If
you have a solid history of borrowing
responsibly and the ability to repay
loans, you'll get approved for a loan.
Getting approved with a traditional
lender is a painfully slow process –
even with great credit scores and
plenty of income. If you have negative
items in your credit reports, the
process takes even longer and you
might not ever get approved.
Why Use Hard Money?
If hard money is expensive, why would you use it? Hard money has its place for certain
borrowers who cannot get traditional funding when they need it.
Because the lender is mostly focused on collateral (and less concerned with your
financial position), hard money loans can be closed more quickly than traditional loans.
Lenders would rather not take possession of your property, but they don't need to spend
as much time going through a loan application with a fine toothed comb – verifying your
income, reviewing bank statements, and so on. Once you have a relationship with a
lender, the process can move quickly, giving you the ability to close deals that others
can’t close (that’s especially important in hot markets with multiple offers).
Hard money agreements can also be more flexible than traditional loan agreements.
Lenders don't use a standardized underwriting process. Instead, they evaluate each deal
individually. Depending on your situation, you may be able to tweak things like the
repayment schedules. You might be borrowing from an individual who’s willing to talk –
not a large corporation with strict policies.
Why Use Hard Money?
The most important factor for hard money lenders is collateral. If you’re buying
an investment property, the lender will lend as much as the property is worth. If
you need to borrow against a different property you own, that property’s value
is what the lender cares about. If you’ve got a foreclosure or other negative
items in your credit report, it’s much less important – some lenders might not
even look at your credit.
With a hard money loan, the property itself usually serves as collateral for the
loan. But again, lenders may allow investors a bit of leeway here. Some lenders,
for instance, may allow you to secure the loan using personal assets, such as a
retirement account or a residential property you own.
The Bottom Line
The Bottom Line:
Hard money loans are a good fit for wealthy investors who need to get
funding for an investment property quickly, without any of the red tape that
goes along with bank financing. When evaluating hard money lenders, pay
close attention to the fees, interest rates and loan terms. If you end up paying
too much for a hard money loan or cut the repayment period too short, that
can influence how profitable your real estate venture is in the long run.