Some people ask us: What do you mean by hard money residential lenders? The term simply means that you can go to certain lenders like us; We ignore your credit score and give you a loan for a single-family home or duplex. The term “hard money” is submerged with names like “no-doc”, private loans, personal loans or bridging loans – it’s all the same. The bottom line is that the underwriting process is based on the tangible assets of the borrower. In this case, the lender uses your real estate as collateral for the transaction and you can obtain a loan in as little as 3-4 days, depending on the circumstances.
You’ll find some hard money lenders that lend directly, lend their own funds, and don’t charge any upfront fees. Hard money residential lenders also make loans for up to 10 years (or longer, depending on the circumstances). This gives borrowers the flexibility they need to maximize their residential property opportunity.
How is residential hard money different from a bank loan?
This is what you can expect from the bank:
To apply for the loan, you will need to show them proof of income, credit score, tax returns, finances, appraisals, etc. That is the least. You will need a typical minimum FICO score of at least 700. The higher the better. You will need a lot of documentation and you will need to provide money for fees up front which includes appraisals, application fees, etc. You can only apply for owner-occupied and investment properties. And your loan application is capped on the loan amount and the number of properties you want to invest in. The entire procedure usually takes more than 60 days.
In contrast, residential money lenders consider your residential real estate as the basis for loan approval. Your credit rating may be zero. You only need to sign a few documents. The amount varies depending on the particular lender. Some ask for as few as three forms and these assess the value of your property. Some lenders completely ignore your credit history and score. You’ll find residential lenders that waive up-front fees. And the whole procedure takes less than ten days. Keep in mind, too, that personal money lenders will offer a variety of requirements on how much they’ll lend (loan-to-value), what types of real estate they’ll lend (commercial, residential, multi-family, land), and minimum and maximum loan sizes.
What you should keep in mind
All bridging money lenders must be certified through their state regulatory agency and through the National Mortgage Licensing System (NMLS). Borrowers should verify the lender’s license through the NMLS to avoid problems at closing, as many states require the lender’s license number to appear on loan documents. Borrowers should be sure to carefully review the lender’s interest rate, prepayment penalty, loan value, default rates, APR, calculation solutions, points (loan fees), etc. For example, a private individual may offer a lower interest rate than a bridging loan company, but may not be willing to offer a work plan, should the loan default, or a bridging loan company bridging money may offer a lower interest rate. , but they do require a high prepayment penalty, costing the borrower more money if they decide to sell or refinance the loan in one to five years. Because these terms are not standardized across the industry, it’s important to check with each lender and ask what their “terms” are, as well as how long it will take to close a loan.
When is a hard money residential loan appropriate?
Residential loans carry high interest rates, so we suggest you approach a residential money lender only under the following circumstances:
- When you have credit problems. This includes bankruptcy, history of bad loans, and instances of default. In other words, when conventional loan associations turn you down and you need to move on.
- When you need quick funds on your residential investment property, like you’ve already bought a house but can’t move in until you’ve sold the present. For this it is necessary to make repairs. That’s where we come in.
- Property repositioning: That is, you want to take advantage of the opportunity to buy and change a house before the market changes. Hard money home loans help you here too.
- You’re a time-constrained borrower who needs a quick closing on a home, either because you need to move quickly or want to sell while the market is ripe.
- To avoid foreclosure
- You live outside of the US and want to buy a home here. A personal money loan will help you.
- You don’t have the time or energy to jump through the many hoops of a conventional lender.
- You want to buy multiple properties or you need complex loans that involve multiple collaterals. Forget banks. Approach Hard Money Residential Lenders
In shorts…
Hard money residential lenders can be your route when your bank ignores you but you need that loan to move forward. Bridge money lenders ignore your credit score and history and may provide you with the money based on your collateral. The risk is greater: you can lose your property and your advance payments. On the other hand, if you can cover the costs, hard money loans may be your best way forward.