WHAT IS A HARD MONEY LOAN?

Posted by Rita H Peterson on September 26th, 2019

A hard money loan in Denver is simply a short-term loan available for real estate. They are funded by private investors or direct lenders as opposed to conventional lenders such as banks or credit unions. The terms are most times around 12 months but can be to longer terms of 2-5 years. The repayment term is always monthly which will consist of interest and principal. We are aware that the market moves fast. The amount the hard money lenders are capable to offer to the borrower is principally based on the value of the subject property. The property may be one the borrower already owns and wishes to use as collateral or it may be the property the borrower is purchasing.

Hard money lenders are principally concerned with the property’s value rather than the borrower’s credit. Borrowers who cannot get predictable financing due to a recent foreclosure or short sale can still obtain a hard money loan if they have sufficient equity in the property that is being used as collateral. The harmony lender always says yes to any offer that has reasonable collateral even if the banks says NO.

Property Types for Hard Money Loans

Hard money loan in Denver can be gotten on any property, whether it is a family residential, commercial building, land or industrial building. This is possible when the collateral is reasonable enough.

Some hard money lenders may specify in one specific property type such as industrial building and not be able to do land loans, simply because they have no genuine understanding in this area. Most hard money lenders have a specific slot of loan they are most comfortable with. Ask them upfront which type of loans they are willing and able to do as this will assist you in the choice of the hard money lender.

Also, many hard money lenders do not lend on owner-occupied residential properties due to the extra rules and regulations but there are those who are willing to wade through the paperwork with the borrower.

Types of Deals Hard Money Should Be Used for:

Hard money loan in Denver are not suitable for all deals but can be used when purchasing a primary residence with good credit, income history. Also, there are no issues such as a short sale or foreclosure. However, obtaining loan from the bank is the best if you can go through the lengthy processes. But when the conventional banks are not working, you can consider the hard money lenders. Hard money loans are ideal for situations listed below:

• Fix and Flips
• Land Loans
• Construction Loans
• When the Buyer has credit issues.
• When a real estate investor needs to act fast on the project

Why You Should Use a Hard Money Loan:

All real estate investors have a different focus in this industry and they choose to use hard money for many different reasons. One of the major reasons their processes and ability to get the loan funded swiftly.

One advantage to the real estate investors is the ability to obtain funding at a much faster rate than a bank loan as it is very significant. Most times when the real estate investor is trying to procure a property with many competing bids, a quick close with a hard money loan will get a seller’s attention and set their offer apart from the rest of the buyers offering slow conventional financing from the bank.

In addition to the above, some other reason a borrower may choose to use a hard money loan in Denver is that they have been rejected by the banks for a conventional loan.  We all know somethings in life may not go as planned. As a new potential investor, it is better you obtain a hard money loan than facing the stress of the banks. Because they will ask some requirements which you might not be able to provide such as short sales, foreclosures, credit issues and your income history. Hard money lenders are able to look past these issues as long the loan be repaid and the borrower has enough equity invested in the property which can stand as the collateral.