Sunday, 2 November 2014

How Hard Money Loan Works

Hard money lenders are private individuals or small firm that lend money based on the property that an individual is buying and it is not your credit score. These loans will cost you more than an average loan. Developers among other will use it to fund deals as you can borrow up to 100% of your purchase price. On the other, hand hard money lenders will suggest you to back up your loan with the real assets. If you know you can buy a property and turn it quickly at huge profit, and you cannot get a standard mortgage. It would be one way; most of the investors use hard money to get into the property having some quick fixes to raise their property value.

Sacramento Hard Money Loans are more easily accessed. If you can develop a good relationship with local hard money lenders, with no appraisal cost you will get funded within a couple of days. Many hard money lenders have their different requirements and operating procedures. The local lenders that only charges 12% rate of interest and only one point of organization if you keep it less than a year. He has over 1100 notes, so he doesn’t want the hassle, if he wants his money to stay loaned out.

The typical hard money lender will charge somewhere around the usury rate. In Texas its rate is around 18% per year, most of the hard money lenders will charge you about 5% origination rate and 13% interest rate on a year note or no points upfront with 18% rate of interest with a shorter call. Now they can get around usury by shifting their origination fee into the commitment fee.
The good thing about hard money lender is that the loan is normally not based on credit score (like local lenders) or at least not on your credit worthiness (i.e. assets and income), now you can receive funding within a matter of days (normally about 7-14 days) rather than over a month, and you can get a loan on any piece of junk that you find. You also are not normally dealing with a processing team. You deal directly with an individual lender. If he or she says yes, then you have the loan. This is an advantage over, going through an entire process of loan committee or underwriting process.

On longer term investment hard money is not a good option but in short terms purchases they can be a very strong tool. 

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