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Substantial Benefits of Working with Hard Money Lenders

Working with hard money lenders does not have to be a long, arduous or complicated process.

Hard money loans are funds that are put up by private lenders or companies specifically for commercial or investment purposes. They require less than average borrower qualifications compared to standard bank lenders and take less time to close than traditional bank loans.

A direct lender often helps include fund money for rehab financing or future work that the subject property requires for resale or to help turn a profit, in the case of rentals or businesses. They also place more emphasis on loan-to-value ratios than on focusing on the borrower’s credit. However, borrowers must still meet hard money lender’s requirements, including their application and qualify for the terms stated in the hard money loan agreement.

There are four different types of hard money loans:

• Commercial Loans
• Wholesale Loans
• Rehab Loans/Flip Loans
• Cash Out Refinance Loans

A hard money loan does not always make sense in real estate transactions. The times when hard money loans make the most sense for investors include the following types of scenarios:

• A unique opportunity arises, such as discounted payoff terms, etc.
• The property is not actively listed and time is of the essence, such as a foreclosure or short sale.
• The borrower needs to quickly close on the property.
• The borrower cannot qualify for a traditional bank loan.
• The property is vacant.
• The property needs rehabilitation.
• The borrower requires a cash-out refinance on a current investment property.

The significant differences between convention loans and hard money loans includes the following features:

• A quick, simple application process;
• Asset-based lending offers more collateral options;
• Fewer borrower qualifications than traditional lending institutions;
• Hard money loans offer a fast approval process and quick closing;
• Loans include the cost of rehabilitation and construction;
• Loan amounts are based on the borrower and subject property needs;
• Borrowers have access to more financing and capital options;
• Offers lower down payment options; and
• Features easier and faster access to loan funds.

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