Hard money loans are a financing tool every real estate investor should keep in mind.
The main advantages of speed and flexibility usually come to mind, but there are many other reasons why real estate investors go with hard money lenders. This article discusses the top 4 reasons real estate investors use hard money loans.
- Fast loan approvals and funding
Applying for a hard money loan is a very simple and straightforward process. In most cases, all a borrower needs to do is just to fill out a standard loan application. In many cases, a borrower can receive a conditional approval after a five-minute conversation with the hard money lenders.
Simply compare this to the countless pages a bank requires a borrower to fill out. Once the application is submitted to the bank, it could be weeks or even longer until the borrower receives approval or even a response. The subject property could be snatched up by another real estate investor by that point.
Once the real estate investor has been approved for the hard money loan, the loan can be funded within a week or two. If needed to save a deal. Reputable hard money lenders in Florida can fund a loan within three to five days.
- Hard money loans make the real estate investor’s offer stronger
An offer from a real estate investor with a hard money loan as financing is seen as strong. This is especially helpful in situations where a property has multiple offers from buyers with conventional bank loans. The hard money loan offer from reputable lenders stand out.
Anyone who has been involved in real estate long enough will hear about a bank pulling financing from the buyer during escrow, putting the deal in jeopardy or collapsing it all together. Hard money lenders are not known to pull funding for arbitrary reasons and thus can be a more reliable source for financing than conventional lenders.
- Income history and perfect credit scores are not necessary
The most important factors a bank considers when approving loans are typically the borrower’s credit and income history. If either of these is outside the bank’s criteria, the loan will likely not be approved.
Hard money lenders primarily focus on the value of the property that will serve as the collateral for the loan, as well as the equity (down payment for a purchase) the borrower has in the property. The hard money lender must be comfortable with the valuation and equity, as this is what allows them to not be as concerned with the borrower’s income and a perfect credit score.
- Getting free advice from a real estate expert
Working with hard money lenders is a partnership. The hard money lender wants the project to go as smoothly as possible, just as the real estate investor does. We share a common goal. The last thing the lender wants is missed payments, unforeseen issues with the property, or any other potential problems that put the project in jeopardy.
A reliable and experienced hard money lender analyzing a loan request or project will give their honest opinion and bring up any issues that could jeopardize the project.