What Factors Do Lenders Consider When Offering Hard Money Loans?
A hard money loan is not like other loan types. It is a loan type that people typically use for renovating homes, and it has different eligibility requirements. If you want to buy investment real estate, this might be a good option for you to consider. Before you pursue one, you might want to know what factors lenders consider when offering these loans. Here are several factors that might affect your ability to get a hard money loan.
Credit Does Not Matter Much
The first thing to realize is that your credit score does not matter much when applying for hard money lines of credit. The lender might check it just to be safe, but they will not typically deny loans to people with poor credit scores.
One factor that does matter to hard money lenders is collateral. When you want to complete a real estate investment project, you will likely need cash to complete the project. If you turn to a hard money lender, they will usually approve loans equal to the current value of the project. For example, if you want to buy a house that is currently worth $50,000, a lender might agree to loan you this amount. If the house needs $30,000 in repairs, you will have to pay for these expenses. Lenders that issue hard money loans base the loan amounts on property values. As a result, you might not be able to borrow the project's entire costs, but you will likely be able to borrow part of the costs.
Another factor that the lender will talk to you about is interest. You will have to pay interest on the hard money loan that you borrow. You might be able to borrow it incrementally. If so, you will probably pay monthly interest on the money you borrowed. A lender will make sure that you can afford to make these payments. You will not have to repay the loan for one to five years, but you must pay interest.
The Benefits of Hard Money Loans
As you can see, getting a hard money loan offers benefits. There are also a few drawbacks that you can discuss with your lender. One significant benefit of a hard money loan is the speed at which you can get approved. The lender will review your application and have an answer quickly. If you would like to apply for one, talk to a hard money lender today.
To learn more, contact a hard money lender.