Mosttimes newbies in the real estate industry think that traditional banks can offer hard money loans. However, it is the hard money lenders who are private individuals and not banks that actually give out these loans. There are several hard money lenders but there also the best. This article will guide you on what is a hard money lender, the best hard money lenders for first-time investors, and also lending investing.
Before going into what is a hard money learner, don’t you think we should first take a brief look at a hard money loan.
Hard Money Loan
A hard money loan is a type of loan that is secured by real property. Hard money loans most times are not what people consider first when trying to get a loan. Hence they are loans of “last resort” or short-term bridge loans. This type of loan is generally what is used in real estate transactions. However, the lenders are usually individuals or companies and not banks.
Hard money loans are essentially short-term loans, not more than one to five years. However, their interest rates are usually higher than they are for bank loans. Hence, no one would like to keep them much longer.
However, the funding time frame for hard money loans is shorter when compared to the traditional financial market. Hence, hard money lenders rely on collateral rather than the financial position of the applicant.
Now that we have known a little bit about what is hard money loan, let us now discuss what is a hard money lender.
What Is A Hard Money Lender?
The question should be who is a hard money lender? Because hard money lenders are individuals who give hard money loans to people who need them for real properties. Hard money learners are not the usual commercial banks that offer loans to individuals. They often give these loans only to people who have experience in real estate investment.
However, hard money lenders aren’t subject to the same regulations that traditional loan lenders are subject to. Hence, they are free to make their own rules about what credit scores or debt-to-income ratios they want their borrowers to have.
Indeed, you can find a hard money lender who will give you a loan even if you’ve been denied by traditional lenders. They are not concerned with the borrower’s creditworthiness, but the value of the property being purchased.
Nevertheless, a hard money lender may loan on any type of non-owner-occupied real estate. However, they often prefer cases with a fairly quick exit strategy. Hence, they are assured of their payment by the end of the loan term.
Why Is It Called a Hard Money Loan?
Hard money loans, like conventional mortgages, are secured loans that are backed by the collateral of the property being purchased. When a loan is called “hard money,” it is because of the value of some kind of hard asset that is being pledged as collateral.
What Are Typical Terms for Hard Money Loan?
Interest-only payments are required, and terms range from 12 months to 3 years. In other words, you’ll only be responsible for making interest payments each month. A balloon payment is a lump sum payment made at the end of the payment term to settle any remaining balance.
Best Hard Money Lenders
There are several hard money lenders in the real estate industry. However, there are few best hard money lenders. These ones have the best reputations in the industry. Also, they have shown to be capable of closing deals quickly without changing their terms last minute.
It should be noteworthy that this list isn’t according to any ranking and it’s only for informational purposes.
RCN Capital Hard Money Lenders
The RCN Capital is a nationwide lender that provides hard money loans for fix-and-flips, rental properties, and multifamily properties. Also, they are into long-term rental financing, which hard money borrowers may be able to qualify for at the end of their loan term.
Furthermore, their maximum loan amount is $2.5million, with an interest rate of 7.49%. However, their terms are one year for fix-and-flips and two years for rentals, also one year for multifamily.
Lima One Capital Hard Money Lenders
The Lima One Capital grants diverse loan options in addition to hard money loans. They also have long-term rental loan options and multifamily loans. Nevertheless, their maximum loan amount is $5million, with an interest rate of 8.99%. However, their terms are one year and three months to two years.
CoreVest Hard Money Lenders
The CoreVest provides different loan products. In addition to bridge loans for fix-and-flips, they provide lines of credit, long-term financing for rentals, rental portfolio loans, among others.
Additionally, their maximum loan amount is $50million, with an interest rate of 6.99%. However, their terms are one year to two years with a maximum credit score of 620.
Lending Home Hard Money Lenders
The LendingHome is a well-known hard money lender in the industry. They also offer long-term rental property loans.
Again, their maximum loan amount is $5million, with an interest rate of 7.95%. However, their terms are one year with a maximum credit score of 620.
Groundfloor Hard Money Lenders
The Groundfloor is a crowdfunding lender for short-term loans. They funds the deals they approve themselves. However, they then put the loan on their platform for investors to fund and refund Groundfloor.
Additionally, their maximum loan amount is $2million, with an interest rate of 5.4%. However, their terms are three to six months with a maximum credit score of 620.
Now that we have known about the best, let us discuss briefly the best hard money lenders for first-time investors.
Best Hard Money Lenders For The First Time Investors
A good hard money lender is one of the greatest resources a real estate investor can have. First-time investors in the real estate business need the best hard money learner.
First-time investors usually find it hard getting a lender to fund a deal. This is indeed true with fix-and-flip loans. The lender has no way of knowing if the borrower is competent in managing the construction and other things involve.
Hence, most private lenders only work with experienced investors. They expect a borrower to have some successful deals in their portfolio to get approval for a loan. They usually require some sort of verification of the previous investments.
However, for a flip, they may require the closing documents from the initial purchase and the sale. For income property, they might look for evidence that shows the borrower owns the property as well as recent income statements or tax returns.
Hard Money Lending Investing
Investing in hard money lending is not for everyone. Only people that have experience in real estate are mostly allotted these loans. Newbies in the hard money lending investing are having a hard time obtaining a loan.
Hard money learners find it difficult to pull out their investment on people they are not sure of their capabilities. However, this is why they are only concern with the value of the property. Hard money lending investing is not an easy task for investors.
Conclusion
In summary, hard money lenders are private individuals who give out hard money loans to people even when the traditional banks refuses.
Hard Money lenders FAQ
Why would you use a hard money lender?
Getting a hard money loan is a good way for someone to quickly get a home ready to sell. They have shorter repayment terms than traditional mortgage loans, so this means they are easier to pay off.
Why is it called a hard money loan?
A hard money loan is a type of loan that is secured by real property. Hard money loans most times are not what people consider first when trying to get a loan. Hence they are loans of “last resort” or short-term bridge loans.
