There’s a lot to know when you are considering taking out a hard money loan.
Hard money lending rates, which are also known as private money loans, are set by each individual lender. These rates can range from around 7% to upwards of 15%. Hard money loan rates are not set by the prime rate—instead they are influenced by the equity in a property and the risk involved for the lender. Hard money loans also have flexibility which gives the lender the ability to set their own rates. This flexibility also gives them the power to fund loans that traditional lenders would deny. Just as the rates are set by individual lenders so are the minimum and maximum loan amounts. Loan amounts are not set by the FHA—they are determined by the lender when looking at risk assessment, the LTV (loan to value) and the ARV (after repair value). Certain lenders in certain situation will loan up to 90% of the ARV and, or the LTV.
The LTV is the biggest determining factor when it comes to the lender’s risk. The risk becomes less as more of the borrower’s own money is invested. In fact, it should be noted that first time borrowers should be prepared to come with at least 20% down. Lenders want to see investors that have skin in the game. The more experience the borrower has, the more comfortable the lender will be when determining loan rates and terms.
Hard money loans typically fund two types of properties—fix and flips and and investment properties that investors may rent. However, these are not the only loans that hard money lenders will fund. They will fund small business loans and primary homes, as well. In the case of a primary home they are typically funded to borrower’s with poor credit that are planning on transitioning into a conventional mortgage at the end of the loan.
Hard money loans give investors an opportunity to compete with cash buyers. The approval process is very quick on hard money loans. The application process is simple and typically take less than 10 minutes to complete and generally are approved after a short conversation with the lender. Most loans are funded within 2 weeks. A seller wants a quick closing date and that will happen with a hard money loan. Conventional loans typically take an average of 45 days to close and at that point the borrower can easily lose the property.
Hard money lenders can help investors, businesses and borrowers with poor credit.
This article gives the reader a general idea how hard money lenders approve borrowers and what type of properties they typically fund. For more information on hard money loans please contact us at level4funding.com.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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