Hard money loans give real estate investors the leverage to close deals fast. Here is what you need to know about qualifying for a hard money.
Collateral – With a hard money loan, the property itself usually serves as collateral for the loan. But again, lenders may allow investors a bit of leeway here. Some lenders, for instance, may allow you to secure the loan using personal assets, such as a retirement account or a residential property you own.
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How to Get a Hard Money Loan Approval – Applying for a Hard Money Loan Present the potential value of the property you want to purchase. Present a clear financial plan for your home project. Prepare additional documentation. Protect yourself legally. Remain in constant contact with your lender.
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So, how can you get a hard money loan? First, you’ll need to make sure your team and your project qualifies. Who Can Qualify for Hard Money Loans? Unlike traditional bank loans, the primary factor hard money lenders are looking at is the overall profitability of the deal the investor is considering. Banks place tremendous focus on both the property as collateral and the buyer’s creditworthiness because they are lending as much as 97% of the property’s value.
Most hard money lenders keep loan-to-value ratios relatively low. Their maximum LTV ratio might be 50% to 70%, so you’ll need assets to qualify for hard money. With ratios this low, lenders know they can sell your property quickly and have a reasonable shot at getting their money back.
It is possible to get a hard money land loan but many hard money lenders won’t do them due to the increased risk and because not as many hard money lenders are familiar with land loans. If the land has been improved (road access, utilities, etc.) and the borrower plans to build on the property this will increase the likelihood of obtaining a hard money loan.
A credit card cash advance is a hard money loan. Or you can get a hard money loan that is secured to equity in the home but was not part of the original purchase price. Hard money lenders usually want the borrower and the security to qualify for a hard money loan.
How to Get a Hard Money Loan Approval. Hard money loans are generally lent to borrowers to finance real estate investment opportunities or other collateral.