Hard Money Real
Foreclosure Help Few People Know About
If you absolutely do not qualify for a loan modification, hard money
real estate loans
may be the foreclosure help you need in order to save your
home, especially if you have a good amount of equity in your
property. In a situation such as foreclosure, hard money
as a short-term solution in order to stop foreclosure and allow you to
do what you need to do with your home and salvage the equity you have
Hard Money Definition
Hard money real estate loans are asset-based
loans secured by real
property. These loans are known to be funded at higher
rates than conventional bank loans, and they are also much more
expensive. The reason for high
costs and fees
is the higher
risk that the hard money lender takes when extending these
loans. They are available as residential hard money loan
as well as commercial hard money loans.
Hard money loans are also sometimes called private
loans. Private in a sense that they are
private investors instead of banking institutions. Private money
investors could be individuals, a trust, hedge fund, or a private
mortgage fund or
"mortgage pool" with multiple private investors owning shares.
They are not depository institutions like banks and savings
and loans companies.
Hard money loans are also commonly known as "last resort"
borrower is in financial
trouble and foreclosure is imminent
It will only work, however, if the collateral or subject property meets
the equity requirements as well as the risk/reward assessment set by the lender.
Why get a loan from a Hard Money Lender?
are times when a hard money loan is the best solution for your
particular situation. There are several circumstances where this
type of loan could either save your home or property, or secure a real
- If you are behind on your payments and a foreclosure is looming in
the horizon, AND you have enough equity in your home or property,
you can secure a residential hard money loan to resolve your situation.
It is extremely rare that a conventional bank will extend a loan to you if you are several
months behind or if the foreclosure process has started on your
property. With a tarnished credit history, you are no longer
deemed creditworthy by traditional banks.
- Hard money lenders are known to make decisions faster than a
conventional bank. Often times, hard money real estate loans
are funded within 7-10 business days
if all requirements are met. This is especially crucial if you
need to stop a foreclosure immediately, or if you need to secure a real
estate deal stat!
- Less Paperwork
- Unlike a fully documented loan or even a "low doc" loan, hard money
loans require much less paperwork. Most hard money lenders only
require four (4) items: loan application, appraisal, preliminary title report, and credit report
(your credit score does not determine approval of your loan, but hard
money lenders require it so they can see what other liabilities you may
- Interest Only Payments
- Hard money real estate loans are mostly offered with interest only
payments. This gives you a lower monthly payment amount than if
the loan were fully amortized. Just be aware that these types of
loans are meant to be temporary solutions and even with interest only
payments, the interest rates and closing costs and fees are still much
higher than a conventional bank loan.
money loans, more often than not, come with a shorter loan term,
ballooning anywhere from 12 months to 5 years. In addition, they
may also come with a prepayment penalty of anywhere from 6-12 months.
Make sure you
negotiate a realistic time frame where you are able to pay back the
loan or refinance out of it.
Hard Money Borrowers
with Low Credit Scores - More often than not, borrowers of hard
money loans have poor credit
and are not
able to meet the credit score requirements of conventional lending
institutions such as banks. They have no choice but to pay the higher
rates and higher costs and fees of a hard money lender.
- Real Estate
Developers and Real Estate Investors - Other
types of hard money loan borrowers include those who need to close a
real estate deal very quickly and do not have time to go through a
conventional bank's beaurocracy and lengthy paperwork to close a
loan. They would much rather pay the higher interest rate,
costs, and fees from a hard money lender in order to secure a lucrative
deal. They see the high costs of the loan as a small
percentage of their potential profit and therefore decide that the high
cost is worth it.
- Borrowers in
Financial Trouble - Borrowers who find themselves in a
financial bind have problems getting approved by conventional lenders
who lend based on the borrower's credit worthiness and personal
financial health. These borrowers often times look to hard
money real estate loans as a great alternative especially if their
property has a good amount of equity. Often times, this is
the only type of loan they can get approved for. Hard money
real estate loans are often used to stop a foreclosure.
Hard Money Lenders
Hard Money lenders are investors who are
willing to lend to "higher risk" borrowers in return for the nice
stream of income from the high interest payments.
- Most individual hard money lenders rely on a hard money broker or
agent to bring them loans that have already been underwritten.
They are not known to advertise for hard money loans. They
let their broker find the loans and package them up to fulfill all
their requirements. They are comfortable and experienced with
trust deed investing but would rather have an agent generate all the
paperwork and communicate with the borrower.
- Private Mortgage Funds or Mortgage Pools - Hard
money lenders often times create a fund or a mortgage pool that
aggregates individual investors' moneys to fund loans backed by real
estate. If you call one of these lenders, there may be a loan
committee who issues approval for your loan based on the fund's
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