Right and Wrong about Hard Money
This is part 2 of a series of articles that will “debunk” the myths about the hard money industry and we will explore why hard money is a good alternative for investing in real estate. In this article we will talk about some right and wrongs about the industry.
“Are Hard Money Loans Considered High Risk Loans?
This is the reason why the points and interest rates are higher than bank loans. The property that is used for this loan is the collateral for the loan, and most of the time, we do require the borrowers to personally sign for the loan and pay for it if something goes wrong. The bottom line is, if your loan was not a High Risk Loan then you would seek other financing options. This type of financing does not come cheap.
“Client Credit Score” is the basis for the hard money to make his decision?
Your credit score is not the basis for lending. The only reason credit reports are pulled is to make sure that the information that you gave us about your financial and personal situation (payment history, lines of credit, etc.) on the application match with a third party repository. Remember that the “Hard Money Loans” are asset based. Meaning that the loans are given based on the merits of the asset itself (is based on the property’s worth). Aside from that, we also check the borrower’s credentials such as their liquidity, the investor’s experience, real estate team that they have, as well as their income and expense ratio.
“Closing will take 30 days or more?
These loans are pretty quick to close! If a complete file is submitted to and your hard money lender can verify all the facts about your loan as well as the property values, chances are that you could get it to close in 48 to 72 hours after final approval. We normally see 5 working days after all the paperwork is in.
When you request a hard money loan, the Hard Money Lender only uses the appraised value of the property and not the purchase price?
That may be true in the past but today hard money lender use three valuation methods to make sure that the risks of the loan are kept to a minimum. Remember that hard money loans are not based on cash flow or the ability of the client to repay, they are mainly based on the value of the asset (asset based lending). The three methods of valuation are; 1) The purchased price, 2) the Appraised value of the property as is, and 3) Appraised value of the property after repairs are done or “after repaired value.” We actually need not just what you are buying it for and but also how much is going to cost to do the repairs.
One last word about Hard Money Lending, if you seek this type of financing please make sure you are dealing with someone who has the knowledge and ability to close your loan. Mike’s Hard Money will provide you with the real estate investment cash you need for your deals getting you closer to your desired lifestyle. When it comes to Hard Money Loans no one but Mike can provide you with CASH in a FLASH!