How Exactly Do You Qualify For A Hard Money Loan?

Are you looking for real estate hard money loans? What is an example of hard money? How do you qualify for a hard money loan? Or is it hard to get a hard money loan

If you can answer yes to the first question or have a hard time thinking of how you qualify or what are hard money loans used for, then you are missing a crucial ingredient in actually getting the resources you need access to. Keep reading to learn more about hard money loans and how you can possibly get access to one.

In short, to qualify for a hard money loan, you need a piece of collateral property that can secure the deal. A good credit score is also helpful, although it depends on the specific lender.

Collateral Property

How much you can borrow from a hard money lender is going to be largely based on the property value of the collateral real estate being put up. These deals often last for a year, but some go several years. The collateral property can be something the borrower already owns, or it might be a property that they are acquiring.

A hard money loan is ideal at times that banks or credit unions are too cumbersome to deal with, or they’re just isn’t enough time. Many borrowers use hard money loans for land and construction loans, if they have credit issues, they need to move quickly, or to do fix and flips.

Hard money lenders generally focus on how much equity a borrower has in any collateral property. Your credit rating isn’t as important to them. Even if you have previous issues like short sales or foreclosures on your record, lenders can overlook this when you have enough capital to pay the loan interest.

Those who lend hard money also take into account your plant for a property as a borrower. You may need to present them with a reasonable plan illustrating specifically how you intend to pay off the debt in time. This usually involved property improvements and then selling it, or just getting more long-range financing at a later date.

Experience in Real Estate

The world of hard money lending doesn’t always have the best reputation, and that can make you especially wary if you’re new to this scene. Myths and legends persist to this day of shady backroom deals and lenders forcing loan terms that put them in a good position to outright seize collateral properties. Such things once happened, but it was decades ago, as the modern scene is quite clean and legitimate.

If you want to find a reliable and trustworthy hard money lender to deal with, you don’t need to venture smoke-filled rooms in the dark of night. A simple Google search will turn up plenty of professional options in your area, just as simply as if you were looking for a contractor or Chinese takeout.

Another way you can find a good hard money lender is by going to regular meetings of your community real estate investor club. Such club meetings happen in most markets, and they tend to be attended fairly frequently by hard money lenders that are hoping to network with prospective buyers. If there aren’t any hard money lenders present at a particular meeting, then ask the other real estate investors there if they can suggest or recommend any specific lenders.

Interest Rates 

Hard money loans do carry significant interest rates, and if you fail to pay back the loan on time, or otherwise violate the terms and conditions of the contract, you do risk losing the property that you put up for collateral. As such, it’s crucial that you thoroughly background check and verify any particular hard money lender that you are considering partnering up with for your next deal. If you do this, then you can safely benefit from the advantages that this kind of lending has to offer.