Hard Money Financing

Hard Money Financing Versus Traditional Commercial Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Hard Money Financing Versus Traditional Commercial Loans Was UPDATED And PUBLISHED On February 1st, 2020

Hard Money is normally not for real estate investors with poor credit or first-time investors.

  • Many veteran experienced real estate investors use hard money financing as a great short term tool
  • They can get fast cash and close on a real estate transaction in two weeks

Two of the greatest benefits of using hard money are the following:

  • Speed: Hard money loans can close in anywhere between a week and no later than 30 days
  • Flexibility: Limited documents and lenders are open-minded where everything is negotiable

In this article, we will cover and discuss Hard Money Versus Traditional Commercial Loans

Time Is Money For Real Estate Investors

What is the difference between financing hard money and traditional commercial loans

Time is money and there are many deals a real estate investor may run into and may not have the time to get traditional commercial financing with a bank where it can take more than 90 days.

  • Hard Money Financing is the solution and the key
  • Hard Money Loans are normally used as a bridge loan where real estate investors can purchase the property that is not stabilized, in foreclosure, vacant or a property that needs major work
  • Investors can purchase a property that needs extensive work
  • Hard money lender can offer the acquisition and construction budget in a matter of a few weeks unlike several months with banks and traditional commercial lenders

In this article, we will cover the main benefits for real estate investors to use hard money financing versus traditional commercial loans.

Hard Money Financing Offers Fast Approvals And Closings

In general, real estate investors who seek financing on a commercial and/or investment property at a bank or direct commercial lender, it will take them more than 90 days to get the deal from origination, processing, underwriting, conditions, and closing/funding.

  • However, hard money lenders normally close their loans in 30 days or less
  • Processing and underwriting of hard money loans are extremely streamlined
  • It is a very simple process where borrowers just need to complete a one-page loan application similar to the Residential 1003 mortgage loan application

The conditional hard money financing approval is normally issued within minutes or no longer than 24 hours of the loan application is submitted.

Hard Money Financing Versus Bank Loans

Here are the comparison and contrast of hard money financing versus commercial bank loans:

  • Investors completing a bank commercial mortgage loan application needs to complete an extensive five-plus page application
  • Banks will not get back with further instructions for at least a week or longer after the submission of the application

Documents Required For Hard Money Financing

What is the difference between financing hard money and bank loans

Before any conditional commercial loan approval is issued, banks will require the following documents:

  • three years of tax returns
  • personal financial statement
  • Profit and Loss
  • business plan and pro forma summary
  • site visit by bankers
  • the initial review by the bank’s credit committee

By the time the bank starts proceeding with the loan package, the property the real estate investor wants to purchase may be sold already:

  • With hard money lenders, once the lender issues a conditional approval and borrowers signs the loan commitment, the loan can be funded once the title is clear which is one or two weeks maximum
  • Loan approvals on hard money financing take no more than a day in most cases

Hard money lenders are open-minded.

Benefits Of Hard Money Financing

If the investor has an emergency deal that needs a super-fast closing, it can be done in a few days which is not possible from any bank in the continental United States:

  • Hard money shows the seller of the property that the deal will close with no hiccups and shows strength on the buyer
  • When a real estate agent puts that the property buyer is getting financing via hard money loan, this show strength and most sellers prefer hard money financing buyers than traditional commercial bank financing

Red Tap At Commercial Banks

Banks are by the book and have a lot of internal rules and regulations, unlike hard money financing lenders.

  • There are often times when banks put funds from the buyer’s escrow during the funding process for one reason or another which puts the whole project at risk
  • Nothing is wrong with bank financing, however, bank financing is best when investors are going for end financing and not no doc fix and flip hard money rehab loans

Hard money loans are much more reliable for real estate rehabbers and property flippers than traditional bank financing.

 Hard Money Loans Chicago

What does Red Tap mean in commercial banks

Chicago is the second-largest city in the nation and the rehab boom is in full motion.

  • Most buildings in Chicago and Northern Illinois are 60 years old or older and are in dire need of rehab
  • There are many vacant homes and apartment buildings in Chicago where real estate investors always wanted to acquire and rehab and either flip or keep them as rentals
  • Due to lack of hard money financing, this was not possible for many real estate investors and property rehabbers
  • Now with hard money financing being easily accessible and the 2 to 3 week closing turnaround time, real estate investors can go full steam ahead
  • Investors can begin acquiring and developing homes and apartment buildings
  • Hard Money Loans is available in most 50 states

Real estate investors needing hard money financing please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email inquiries at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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