Have you ever heard of Hard Money Lenders in California? What does this type of lender do and when in life would a person need to take advantage of this type of lender? These are the questions we are going to answer, so keep reading to find out whether a hard money lender can be the solution to your unique mortgage situation.
What Is a Hard Money Lender?
A lender is considered a hard money lender when it lends money outside of a traditional bank or credit union. Hard money lenders are known to lend money to individuals as well as businesses.
In some instances, hard money loans are referred to as bridge loans. Bridge loans are short-term loans that are many times used by investors, particularly those in the real estate industry. The funds accessed through bridge loans are generally used by real estate investors to flip homes and renovate properties. The funds themselves are typically provided by investment groups or private lenders.
A person or entity who wants to access funds through a hard money lender will need to provide equity in order to qualify. This is because most hard money lenders base an entity’s qualification status on equity rather than a credit score. In fact, because of this, you may have heard of hard money loans being referred to as equity-based loans. With hard money loans, you won’t have to fill out a bunch of paperwork and provide all types of documentation to prove you have good credit. Instead, you simply put down a large down payment to offset the lender’s risk in loaning you money.
If, however, you do want to use your credit to secure funds through a hard money lender, then you should make this known when you start applying for funds. Let the lender know you are willing to provide documentation of good credit to try and lower your interest rate on the borrowed funds. Some hard money lenders will provide a reduced interest rate for those with really good credit. If you can’t find a hard money lender willing to provide a reduced rate for good credit, then you may find a traditional lending route to be more appealing. A conventional lender will without a doubt almost always be able to provide the lowest interest rate possible on a mortgage.
Why Should You Get a Hard Money Loan?
If you don’t qualify for a conventional mortgage loan through a bank or credit union, then a hard money loan may be the only way for you to get a mortgage. On the upside, a hard money loan gives you access to funds much faster than a conventional loan. Hard money loans are usually processed and available within only a few weeks or days. A conventional mortgage can take months to get approved for and access to funds.
The following is a list of borrowers who tend to access funds through hard money loans:
Property Flippers
Do you buy homes, renovate them, and then flip them for a profit? Or is this something you think you might be interested in? Either way, you will need funds to perform property purchases and renovations. Unfortunately, a lot of conventional lenders won’t provide funds for flipping properties. However, hard money lenders especially like lending to property flippers because they know they will get their money back as soon as the property is flipped (as long as a profit is made). It’s a win-win for everyone. Property flippers get fast access to cash to perform renovations while the lenders know the property will be flipped as fast as possible, meaning they get their funds back fast too.
Can’t Qualify for Traditional Loan
There are numerous reasons as to why you may not qualify for a traditional mortgage loan. Take for example you are going through a divorce. Your credit score is good but the divorce is holding up things when it comes to accessing funds through a traditional loan. With a hard money lender, you don’t have to fret about the divorce. Instead, you can explain your situation and mention the equity you have to work with. This will help the hard money lender understand how much you want to borrow and whether you have sufficient equity to back up the loan.
Homeowners Facing Foreclosure With Lots of Equity
If you’re facing foreclosure but have lots of equity and want to keep your home, then you should definitely speak with a hard money lender. However, keep in mind that the only way a hard money lender will want to work with you is if they can:
Final Thoughts
Are you considering applying for a hard money loan? We hope the information we provided above helps you have a better understanding of how these loans work and who most commonly takes advantage of them. Most hard money lenders provide flexible repayment terms, but most importantly, they give you fast access to cash, making it simple to get your hands on the money you need when you need it. Just remember, you don’t need a top-notch credit score to get funds through a hard money loan. Instead, you simply need equity, or in some instances, some form of substantial collateral. These loans are meant to serve as a short-term form of funding, so don’t approach or use them as a long-term form of getting your hands of cash. When used correctly, California Hard Money Lenders can help you make and save money.
