Why You Should Choose a Private Hard Money Lender

For quick cash and hassle-free transactions, a private hard money lender is the way to go. If you are planning on flipping a property quick the high interest rate associated with private lending should not be an issue for you.

Here are just a few of the reasons you should consider using a private hard money lender:

• When paying cash for bank owned properties, showing proof of funds is usually required by the bank to even consider your offer. That is where private hard money lenders can come to your rescue. Not only will they be able to show proof of funds, but they will have the funds available at closing on your behalf.
• The conventional loan can take as long as 30 days to close because of the process to verify bank required documentations. However, a standard cash deal will usually take approximately 2 weeks to close.
• Investors are typically self employed and are not paid by paychecks, which can make it difficult, sometimes impossible, to verify income. Private hard money lenders won’t require you to prove what you made the year before.
• Private hard money lenders do not evaluate credit history when making loans. Since most of us have had periods of our lives that we have been late paying bills or perhaps just not able to pay them at all, when banks at your credit history, those times will make a bearing on their decision to approve your loan and at what interest rate.

When paying cash provided by a private hard money lender, there are no rules to follow like HUD and FHA sponsored loans such as seasoning issues or any extra stipulations. The banks state what they’re asking and you make your offer, simple as that. The next step will be a quick hassle-free closing.

Credit Criteria and Hard Money Loans

If you are a real estate investor interested in buying and rehabbing properties, the first step in your real estate investment process will be preparing your finances and finding your financing sources. Operating capital is critical in any business and it is especially important in real estate investing.

Today lenders demand excellent credit for conventional financing. They also place a great deal of importance on your current situation such as time on the job, savings and assets and the value of the property to be purchased. If you are an established real estate investor, this examination of your finances is probably not a problem, but first time investors may find getting financing more difficult.

When you deal with hard money lenders, credit is generally not a consideration in their decision. Having a strong exit strategy and your plans to repay the loan are the important factors for hard money lenders. They will use their gut feelings about the borrower in making a decision more often than crunching numbers.

A hard money loan, also known as private financing, can be your best source when conventional lending does not come through. Interest rates from private lenders are generally higher, but since it is a short term loan this is generally not a major concern for most investors. Private loans are to help the borrower and the lender make money with as little hassle and red tape as possible.

With either method of borrowing, conventional or private, repayment of the loan is important and the property in question is used as collateral. The conventional lender will have standard guidelines such as ownership seasoning. A hard money lender looks at what the property will be worth after rehabbing.

Hard money lenders have different underwriting of loans from conventional lenders as well. However, whether pursing traditional lending from a financial institution or private cash the criteria for the loan remain the same. Collateral, capacity, credit and character are the points that both lenders will look at, just from different perspectives.