There is a lot of confusion around Hard Money loans, for starters, the term Hard Money sounds scary! It is often assumed that hard is referring to high rates and fees, however, hard is referring to a physical asset, in this case, real estate. Like a traditional mortgage, A hard money loan is made using real estate as the collateral that secures the loan. There are a variety of reasons why a borrower would get a hard money loan. Most often, borrowers opt to use hard money because of the flexible deal structure, easy application process, and quick timing.
HARD MONEY LOANS ARE FLEXIBLE.
Most hard money lenders are relatively small businesses. This allows borrowers to speak directly with decision-makers who approve or deny loans. In contrast to traditional lenders who don’t communicate directly with borrowers, A hard money lender offers a personalized experience with flexible underwriting and loan terms to accommodate a borrower’s unique loan scenario.
This flexibility is most apparent in the underwriting process of a hard money loan. For example, hard money lenders often overlook bad credit or high debt to income ratios when making a loan if the property has sufficient equity. This is referred to as an equity-based loan. Hard money loans also allow for flexible income documentation. Traditional lenders request one or two years of tax returns while a hard money lender will qualify you with as little as 6 months of bank statements. These are commonly referred to as bank statement loans.
In addition to accommodating a borrower’s challenges, A hard money loan can solve financing problems for unique property types. There are a variety of property types and scenarios that can be difficult to finance, such as Land Loans, Mixed-Use property loans, Commercial properties with high vacancy, and purchase financing for As-Is properties. hard money lenders provide financing solutions to all these unique property types that don’t qualify for institutional financing.
For these reasons, it is common for real estate investors, self-employed borrowers, foreign nationals, and borrowers who are challenged by credit or verifiable income to take advantage of the flexibility that hard money loans offer.
HARD MONEY LOANS ARE EASY TO APPLY FOR.
If you have applied for a traditional home loan before, then you know that the process can be brutal. The documents requested to be approved for these highly regulated loans can seem never-ending and requires a significant amount of financial planning. If you have not prepared your bank statements, seasoned your down payment money, preparing your tax return and debt to income ratio well in advance, likely, you won’t have sufficient documents to complete the application process and receive approval. This rigorous application process leads many borrowers to hard money.
Hard money loans provide a solution to this rigorous process by replacing it with fewer requested documents and minimal loan docs to complete. The application process for a hard money loan usually DOES NOT REQUIRE a tax return, seasoned down payment money, proof of employment, or multiple credit checks. The loan applications are usually less than 20 pages and are commonly completed via DocuSign.
In comparison to traditional financing which can take weeks to process, hard money loan applications can be completed within a day or two. This is primarily due to the direct style of communication and fewer regulatory hoops to jump through. This provides a borrower with quicker responses from their lender and clarity on the timeline to close.
HARD MONEY LOANS ARE ABOUT TIMING
In real estate, there is a common fraise that I am sure you have heard before, that fraise is location, location, location. If there were another fraise that was just as valuable, it would be timing, timing, timing. In Real Estate, timing is everything! hard money loans provide timing solutions both for closing times and loan terms.
Closing times are most valuable to real estate investors who find a great buying opportunity and need to take immediate action to secure the property. This is often referred to as quick close financing. When a real estate investor identifies a great buying opportunity, the competition to acquire the property is fierce. To make the most attractive offer, hard money loans are used to provide quick closing times that are attractive to sellers. These quick close transactions can occur in as few as five days.
Hard money loan terms also provide favorable time frames to investors who are looking to sell or refinance a property in 12 months or less because of the shortened pre-payment penalties they offer. Generally, hard money loans are written for 1–5-year terms and have a 12 or 6-month prepayment penalty. In some cases, hard money lenders might offer a loan term without a pre-payment penalty, this allows a borrower to pay off the loan ASAP without any penalty. These short prepay periods and quick closing times are attractive to investors who are looking to Fix and Flip a property, complete a 1031 exchange, or need time to stabilize a rental property.
The Most Common Hard Money scenarios
Flexible underwriting, ease of application, and custom times frames attract borrowers for a variety of reasons. Below we have outlined a list of hard money loan products that we offer that may provide you or your client the financing solutions you have been looking for.
Alliance Portfolio Hard Money Loan Products
- Hard Money Loans for Self Employed borrowers
- Hard Money Loans for borrowers with bad credit
- Cash Out hard Money Loans
- Self Employed Jumbo Loans
- Investment property financing
- Second position Hard Money Loans
- Commercial Hard Money Loans
- Second Position Commercial loans
- Hard Money Land Loans
- Hard Money Bridge Loans
- Hard Money Multi-Family Loans
- Hard Money Industrial Loans
- Equity-based loans
- Bank Statement Loans
- Fix and Flip Loans
- 1031 Exchange Loans
- Foreign National Loans
- ITIN loans
- ADU loans
- Cannabis Loans
- Business Purpose Loans
- Quick Close Financing
If this article has left you wondering or you have a specific scenario to enquire about, we are here to help answer those questions. Call us any time! We will be glad to hear from you! 949-349-1322.
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Contact:
ALLIANCE PORTFOLIO
120 Vantis Drive #515
Aliso Viejo Ca, 92656
Info@allianceportfolio.com
(949) 349-1322
http://www.allianceportfolio.com/
Real Estate Broker
California DRE
License #: 02066939
ABOUT US:
Alliance Portfolio is a Leading Full-Service, Private Hard Money Lender in California.
We serve borrowers who have unique situations that do not meet strict institutional guidelines while providing investment opportunities that are well secured and well underwritten with desirable returns on investment capital. Our services include private equity finance, hard money loans, bridge loans, fix and flip loans, cash-out financing, quick close loans and second mortgages on single family real estate, multifamily real estate, commercial real estate, light industrial, cannabis and land properties in California with an emphasis in hard money loans and private hard money lending in Orange County, Los Angeles, San Diego, San Jose, San Francisco, and the surrounding bay area.
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