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Why Use Hard Money Loans

By Dennis Dahlberg Broker/RI 623-582-4444

Mortgage and Lending with Level 4 Funding NMLS 1018071 AZMB 0923961

August 24, 2018 01:06 PM

There are many benefits to using hard money loans once a borrower understands the process and the fact that these are legitimate lenders.

There are many reasons that a borrower decides to use hard money loan instead of using a more conventional lender, such as a mortgage company or a bank. The first reason that most people think of is because the borrower has bad credit and is not able to secure lending from a bank. But in most cases, the borrowers in the majority of all the loans are investors who are in need of a very quick funding loan to make a great purchase. When a property is offered at a reduced price or is in a high demand area, then time is critical. And in some cases, time is worth the added expense of using hard money to secure a purchase. And if the buyer chooses to, he or she has the ability to seek traditional financing at a lower rate after the initial purchase is completed.

Hard money processes much more quickly than traditional loans because the loan approval is based on the loan to value ratio and not on the borrower’s personal credit-worthiness or ability to repay the loan. So instead of a long drawn out process with hundreds of documents, the hard money lender Austin Texas just needs to have the property appraised to determine the current market value. Then, in most cases, the lender is willing to offer a loan of up to 70% of the current property value. This streamlines the process for both the lender and the borrower and ensures that the property holds enough value for the lender to sell it and recover his or her investment if the borrower defaults on the loan.

Borrowers With Bad Credit or No Credit Use Hard Money Loans

Of course, there are some hard money loans that are written for borrowers who have poor credit or no credit. In these cases, the borrower must be able to pay for 30% of the cost of the property out of pocket or from some other source as the hard money lender Austin Texas will only offer up to 70% of the property value. But for buyers who have no credit history or poor credit, this is a viable and welcome opportunity to purchase property. The higher interest rate is far better than no loan at all. And again, if the borrower can improve his or her credit score, then refinancing is always an option to get a lower interest rate.

A Viable Option for Many Reasons

Hard money loans are not considered conventional but they are a legitimate and viable option for many borrowers. Not only is the process fast and far less complicated than traditional loan applications and approvals but the criteria for securing the loan is also much less difficult. As long as the property exceeds the amount of the requested loan by 30% or more, borrowers will not have a difficult time locating a lender who will offer hard money to close the deal.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.