Hard Money Loans
Better Than Traditional Bank Loans
What is a Hard Money Loan?
A hard money loan is another option for real estate investors when a traditional mortgage lender may not work for their situation. A hard money lender uses a property as a “hard” asset and collateral. There a ton of ins and outs. Let’s break it down.
A hard money loan is an asset-based loan. One of the biggest factors affecting the approval of a traditional loan is your credit history and income. Lenders want a candidate that possesses a reputable re-payment history because this demonstrates the consumer’s ability to repay loans.
However, it is no secret that a great credit score and a lot of income, isn’t necessarily a golden ticket to approval – the overall process can be invasive and take a long time. Private lenders utilize a different approach by lending funds based on collateral; therefore, the lender places less emphasis on credit history.
Private money loans are not for everyone, but there are several situations where these loans make sense. Thanks to Chip and Joanna Gaines, one of the biggest investment trends is flipping houses. If you’re just starting out, and do not have the capital to put up front, a private money loan makes sense – you’ll own the property for a short window so that you can remodel the property and sell it.
How Does a Hard Money Loan Work?
Generally, hard money loans are contracted for a short-term – usually between 6 to 24 months. A real estate investor would not want their loan for a long period of time because the interest rates are typically higher than traditional loans. One of the biggest benefits of choosing a private money loan is the speed at which you can close. Walnut Street Finance can close quickly in a matter of days which is essential when trying to win the bidding war on a property for your next project.
Basically, hard money loans allow real estate investors and developers the opportunity to purchase more properties and do more deals with less upfront capital which results in a great return on their investment.
Hard Money Loans
Fix & Flip
Fix & Flip
Found a property that you want to rehab and sell for your next project? A fix and flip loan is right for you. A lump sum is usually paid at closing to purchase or refinance the property, with the rest of the loan paid as you reach construction milestones.
Have you identified a real estate investment opportunity for your next project but don’t have enough cash? An acquisition loan helps you buy a property, whether the plan is to resell it, renovate it and flip it, or develop it. Let us help you get the deal!
Are you cash-strapped between projects, or need funds to snap up another deal before it gets away? Bridge loans can “bridge the gap” and help you purchase another property by leveraging non-owner occupied real estate you already own.
How is a Hard Money Loan Different from a Traditional Loan or Direct Loan?
There are a number of factors that differentiate private loans from traditional and/or direct loans. Private money loans differ from traditional bank financing because they offer greater leverage to the borrower and they are able to close and fund deals faster than a traditional bank loan.
- Speed: Most private lending companies are not as concerned with your financial position – unlike traditional and direct loan lenders which allows them to move more quickly through the loan closing process. Private lenders can close in a matter of days if the borrower is well prepared and the property doesn’t have any red flags. Speed can really be a deal breaker when multiple offers are on the table.
- Adjustable Repayment Schedules: Typically, traditional and direct lenders do not have a lot of flexibility when it comes to the underwriting process. Unlike hard money lenders, private lenders have the freedom to tweak repayment schedules and other conditions, within the contract, because they are not held to strict guidelines and regulations like traditional banks.
- Approval: Private lenders loan money based primarily on the value of the property. We do consider borrower credit history and experience, but our loan programs are flexible enough to work with all borrowers who have a decent deal and borrower profile.
Hard Money Private Loan vs Traditional Bank Loan
|Hard Money Loan||Traditional Bank Loan|
|Can close in days||Speed||30-45 days to close|
|Minimal||Paperwork||Bank regulations & checklists|
|Borrowers qualify based on project and equity. Less than perfect credit does not disqualify.||Qualifications||Qualification often not possible for renovation projects. Borrower credit score weighed heavily.|
|Flexible rates and terms are available and designed around project and borrower||Flexibility||Set loan rates and terms|
“Extremely glad we went with this lender. They are not just a lender but a fabulous resource as well. They have provided a wealth of information on renovations from vendors to agents that are top notch in this market. They are interested in the success of their clients and I have been able to call them or email them with questions. I always get a quick and informative response. We turned down a loan at a lower interest rate and I’m glad we did. No other lender wants to help you like this one. Use them.”