Hard Money Loan: Is It Hard To Get A Hard Money Loan?

Are you struggling to obtain a loan from banks? Or may ask on how do you qualify for a hard money loan? If traditional lending options aren’t available to you, you may have some questions about hard money loans like  what are hard money loans used for? Are these loans easy to obtain? You can find answers to all of these questions below.

What Are Hard Money Loans And How Do They Work?

Conventional loans are provided by either banks or credit unions. In contrast, a hard money loan is funded by a private investor. These are designed to be short-term loans. Typically, the terms of a hard money loan will be around 12 months, but it is possible to extend the terms to as long as five years. 

A borrower that takes out a hard money loan will need to make monthly payments. In most cases, the payments will only cover the hard money loans rates interest, but in some cases, a portion of the payments may cover the principal of the loan as well. At the end of a term, the borrower will make a large balloon payment. 

Is It Hard To Take Out A Hard Money Loan?

These loans aren’t necessarily easy to secure, but they can be an excellent option for people that have less-than-stellar credit. The main factor a lender will consider is the value of the property. 

A borrower that’s had issues in the past, such as a short sale or a foreclosure, may be able to get a loan from a hard money lender. However, the borrower will need to have plenty of equity in the property that is serving as collateral as a loan. Since hard money lenders have collateral, they are much more likely to be flexible. 

What Kinds Of Properties Are Eligible For Hard Money Loans?

Borrowers can obtain a hard money loan for virtually any type of property. With that said, it’s common for hard money lenders to specialize in a specific type of property. It might be important to know what is an example of hard money loan.  Some hard money lenders will only provide loans to borrowers that are using land as the collateral for the loan. 

While it is possible to receive a hard money loan for a property that’s owner-occupied, many lenders will be reluctant to work with borrowers like this. When the owner of a piece of property is still living there, there are many additional regulations that lenders must comply with. Some lenders prefer to avoid those rules and instead partner with borrowers that are easier to work with. 

Is It Smart To Obtain A Hard Money Loan?

A hard money loan is only a good option for certain types of borrowers. If you have strong credit, and you have not had issues such as a foreclosure in the past, you’ll find that a conventional loan is the better option overall. 

There are two situations in which you should seek a hard money loan. The first reason to look at these loans is if traditional financing isn’t an option. If banks aren’t willing to lend you the money you need, you should strongly consider talking to private lenders. 

A hard money loan is where they can be beneficial if you need money immediately. Securing a loan from a bank can take time. When you work with a private lender, you’ll be able to obtain funds immediately. A hard money loan could keep an investment opportunity from slipping through your fingers. 

Whether or not a hard money loan is difficult to obtain will vary based on your circumstances. If you have equity in a non-owner occupied property that you can use as collateral, it’s likely that a loan like this will be able to secure. Explore your lending options and decide how you would like to proceed.