When you hear hard money loan, you likely cringe. That’s because certain ‘bad lenders’ made a bad reputation for hard money loans when in reality there are many reasons to like them and consider using them.
If you don’t understand how hard money loans can be good, keep reading to learn the top 5 reasons hard money loans are better.
1. They are more Flexible
If you’re buying an investment property or a fixer upper, chances are you’ll get turned down for traditional financing. You might also get turned down if you don’t have the exact credit score or debt ratio lenders require.
Hard money loans don’t have these problems. They focus on the collateral and can recognize a property’s value after renovations, lending you money on that amount, not on the home’s current value which wouldn’t leave you with enough.
2. They Close Fast
Traditional loans take a long time to close. When you’re looking at investment properties or properties buyers could buy with cash, you need to move fast. Hard money loans close in a matter of days or weeks, not months like traditional loans.
3. Less Documentation Required
Hard money loans don’t grill you for every financial detail. Yes, they need to make sure you can afford the loan, but again, the focus is on the property’s value. You don’t need perfect credit or a low debt ratio.
You will have to supply some documentation to get the loan, but it’s much less than what traditional lenders will require.
4. You can Have More than One Hard Money Loan at a Time
You don’t have to worry about having too many loans. If you can prove you can afford it, and have the money to put down, you can have multiple loans, increasing your real estate portfolio. The key is to find properties that have enough collateral so hard money lenders can lend you the money.
5. You can Buy Foreclosures
Typically, traditional lenders decline applications to buy foreclosures. Since most foreclosed properties are in distressed condition, the homes can’t pass an appraisal which means no loan approval for the investor.
Because foreclosures can be a profitable way to get into real estate investing, it’s important to be able to buy them and with hard money loans, you can. Hard money lenders look at a home’s potential – aka what is the home worth after you fix it up? That’s the number they focus on, not the home’s current value.
If you’ve thought about hard money loans or avoided them, it’s time to reconsider. Hard money loans can help you reach your financial goals by providing the financing you need to buy homes, whether as your primary residence or an investment.
At Save Financial, we offer the most attractive rates and fees on hard money loans, helping you to get the most out of your financing and real estate investments.