When you need to get money so that you can buy the house you want, or prevent a foreclosure, it is quite possible that you may find some obstacles in the way. Traditional lenders do not give mortgages as readily as they used to, and many people find that they cannot get a mortgage at all. A hard money lender may be just what you need to be able to buy your home.
Another possible obstacle in getting your mortgage approved is the amount of time it takes to actually get a loan. This can be considerable when going through the bank. If you need money in a hurry, a hard money loan may be what you want. Because these loans are often from individuals or from small companies, the approval process time is usually much shorter.
Even though the time for approval may be short, the actual requirements that you have to meet will usually be stricter than what the bank would demand. They will look at the collateral carefully, but they will also make sure that you have good credit and are going to be able to pay them back. One area that they will be especially concerned about is the amount of equity in the home, because they want to be sure that they can make a profit even if you cannot pay them back.
A hard money loan is usually a rather short term loan, possibly for up to a year, sometimes longer. Some of them may only be for a day or two.
Since hard money lenders know that you are coming to them primarily because you cannot get a loan elsewhere, or fast enough, you can be rather sure that they are going to charge you a hefty interest rate. They know that if you have to come to them for a loan or mortgage that you were probably already rejected by the traditional lenders. Prior to any agreement, you need to make sure that you are fully aware of all the terms and can meet them.
You can find hard money lenders from several different sources, and some banks may even be willing to tell you about them – after they turn you down. These lenders are often known in the community and may refer to themselves as investors, private investors, real estate investors, or private money lenders.
Mortgage and title companies are another possible source of finding hard money lenders within a certain area. Real estate agents may also be able to help you find individuals that can give you the loan you need. Going online and searching for local or state hard money lenders can also enable you to find some, as well. Real estate investor's clubs or associations can be found in more urban areas.
Private investors are not directly controlled by the government. Therefore they can basically make their own terms. However, you also are free to shop around and find one whose terms are more agreeable and possibly lower in interest than another's terms. This gives you some leeway to be able to find a private lender who will offer a loan with terms that will fit your situation better, possibly even giving you longer to pay it back.
If you are buying the property as an investment you also want to make sure that the interest rate is as low as possible to enable you to make a profit, too. Before you complete any kind of agreement, you definitely want to check out the reputation of the private lender, and be sure to have a lawyer look at the agreement before signing, which could save you a lot of trouble later.
Karl Stockton is a prolific writer on real estate, investment, finance and such like. This article was penned for the team at newschoolarch.edu; visit them and learn about their landscape architecture programs.