About Hard Money Lenders

Many novice investors are curious about hard money lenders. There are many questions that arise like Who are they? What is that? How do I get it? Was this helpful? Let me share with you some basic principles about hard money lenders. First, let’s determine what the term “hard money” means. When money is discussed between investors, it is considered “soft” or “hard”.

Usually soft money is easier to qualify for and flexible requirements. Hard money, on the other hand, is just the opposite. That’s much tighter. Not that it’s more difficult to get, but the requirements are very specific and far more stringent. They must, because most of the hard money comes from private individuals with lots of money in hand. This is why hard money is also referred to as “personal money”. The money is used for investment purposes coming from people, just like you and me, not a typical lending institution. So their first priority is protecting their investment capital.

It is a good idea to know what the requirements are when dealing with hard money lending so you can find one that suits your needs. Usually they will only lend you up to 70% of the value of a decent home in repaired conditions. So if you find a house worth $ 45,000 in such conditions, and need $ 20,000 in repair work, and after repairing the current fair market value is worth $ 100,000, then they can usually lend you up to $ 70,000.

Another thing you will encounter is high interest rates. Interest rates vary from 12% – 20% every year and the period can last for 6 months to several years. This rate varies depending on your credit score and experience. In most cases, there will be closing costs or fees for using hard money. Hard money lenders will usually charge from 2-10 points. One point is equal to one percent of the mortgage amount. So charging 1 point with a $ 100,000 loan is $ 1000. These are all important things to consider when choosing a hard money lender.

Many hard money lenders today will also ask you to fill out credit applications that may require you a tax return, the latest payment deductions, and bank statements. Once again, it’s all about protecting their assets. However, some like the old fashion way where they only care about the deal so they drive or see the property physically.