Hard Money Lending Guidelines
A variety of situations can compel a real estate investor or business to seek hard money lending. Due to the flexibility and convenience associated with hard money lending, borrowers are increasingly embracing this alternative financing source when their traditional funding sources can’t accommodate their specific loan needs.
Hard Money Lending Guidelines
Most of the lending guidelines followed by banks and mortgage lenders are standardized and formal. They are quite inflexible and don’t accommodate unconventional loan scenarios. This is quite a contrast to hard money lending where the focus and emphasis is on understanding the intent and purpose of financing sought by the borrower. Collateral is the key element when seeking a loan from hard money lenders.
Residential hard money lending sources can be used for residential properties. Single family homes and other property types with less than four units fall under this group. Investors looking to rehab renovate or construct can find these guidelines quite suitable provided the property being collateralized has enough inbuilt equity. Same can be said about commercial hard money lending guidelines.
Bad credit investors find it very difficult to get a bank loan even when the property on which loan is sought has substantial equity. Income sources and asset requirements are quite rigid. Since the property on which loan is sought is given most importance, hard money lenders are willing to accommodate borrowers with bad credit. As the riskiness of this type of lending is high, most lenders charge high interest rates on hard money loans. The duration of the loan term is usually quite short; they range from six months to a year.
Hard Money Lending Features
- Quick Loan Process – When the documentation is in order, hard money loans generally go from application stage to closing stage in less than a few days.
- Simple Application Steps– The steps involved in hard money lending process are quite simple.
- Flexible & Lenient Terms – Except for the interest rates and loan duration, hard money lending terms are extremely lenient compared to bank loans.
- Small to Big Loan Amounts – The loan amount you can borrow is only limited by the equity in the property. The greater equity you have, the greater the loan amount. Unlike fannie mae or Freddie mac guidelines that limit the maximum loan amount one can borrow, hard money lenders don’t have a set limit on both residential and commercial properties.