Some people ask us: What do you mean by residential hard money lenders? The term simply means that you can turn to certain lenders like us; We ignore your credit rating and give you a single or duplex home loan. The term “hard money” scrolls up and down with names like “no-doc,” private loans, personal loans, or bridge loans; it’s all the same. The bottom line is that the underwriting process is based on the hard assets of the borrower. In this case, the lender uses your real estate as collateral for the transaction, and you can get a loan in as little as 3-4 days, depending on the circumstances.
You will find some hard money lenders who lend directly, lend their own funds, and do not charge any upfront fees. Residential hard money 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 opportunities in residential property.
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 the money for upfront fees including appraisals, application fees, etc. You can only apply for owner-occupied and investment properties. And your loan application is limited to 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 lenders consider your residential real estate as the basis for loan approval. Your credit rating may be zero. You just need to sign some documents. The amount varies depending on the particular lender. Some ask for as little as three forms and these evaluate the value of your property. Some lenders ignore your credit history and score completely. You will find residential lenders who waive upfront fees. And the whole procedure takes less than ten days. Also note that personal money lenders will offer a variety of requirements on how much they will lend (loan to value), what types of real estate they will lend (commercial, residential, multi-family, land), and minimum and maximum. loan sizes.
What to look for
All bridge 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 that the lender’s license number be included on the loan documents. Borrowers should make sure to carefully review the lender’s interest rate, prepayment penalty, loan value, default rates, APRs, find solutions, points (fees for the loan), etc. For example, a private individual may offer a lower interest rate than a bridge money loan company, but may not be willing to offer a work plan, in case the loan becomes delinquent, or a loan company bridging money can offer a lower interest rate. But they do require a high prepayment penalty, which costs the borrower more money if they decide to sell or refinance the loan within one to five years. Because these terms are not standardized across the industry, it is 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 home loan appropriate?
Residential loans carry high interest rates, so we suggest that you approach a residential money lender only in the following circumstances:
When you have bad credit. This includes bankruptcy, bad loan history, and cases of default. In other words, when the conventional loan associations reject you and you need to move on.
When you need quick funds on your residential investment property, like you’ve already bought a home but can’t move in until you’ve sold this one. To do so, you need to make repairs. That’s where we come in.
Property repositioning – That is, you want to seize the opportunity to buy and sell a home before the market changes. Hard money residential loans help you here too.
You are a time-constrained borrower who needs a quick home closing, either because you need to move quickly or because you want to sell it while the market is ripe.
To avoid foreclosure
You live outside the US and you want to buy a home here. A personal money loan will help you.
You don’t have the time or energy to navigate the many hurdles of a conventional lender.
You want to buy multiple properties or you need complex loans that involve multiple collateral. Forget the banks. Get close to hard money residential lenders
In shorts …
Residential hard money lenders can be your route when your bank ignores you, but you need that loan to keep going. Bridge money lenders overlook your credit score and history and may provide you with the money based on your collateral. The risk is greater: you may 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.