With growing disbelief in the possible positive outcomes of private money, it may be necessary to debunk a few common misconceptions in the hope of providing for a better understanding of such loans.
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Hard money is a perfectly legal practice; because the investors on these loans are often individuals or companies with plenty of cash, they often do not need as much documentation to support the file.
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The loan-to-value ratio can often go up to 80%, in some cases, perhaps higher.
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Credit is not needed but if a history is available and scores are in good condition, they can contribute as "compensating factors" to loan qualification.
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Terms up to 30 years are available.
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Minimum loan amounts can stretch to $25,000 or sometimes, even less.
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Interest rates are typically higher than on conventional products; read here to see how the interest rate might not much effect the monthly payment.
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Debt-to-income rations are generally restricted to 43% but can often be expanded with compensating factors.
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Borrowers may submit 24 months of personal (or business, if self-employed) bank statements instead of tax returns if they are unable to qualify with such.
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Obtaining private money funding will not affect the borrower's ability to refinance into a conforming product at any time in the future.
- Closing times are often equal to that of a conventional product, if not shorter.
Hard money loans are not to be feared; they are easier to obtain and generally easier to work with than conforming products. Private funding is a highly flexible alternative to traditional mortgages and can be tailored to everyday people; it is not just for cash-handy investors, regular borrowers are now able to finance the home of their dreams without cookie-cutter scenarios required for conventional loans.
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