What Are Hard Money Lenders

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This guide covers the frequently asked questions at Gustan Cho Associates, What are hard money lenders? What Are Hard Money Lenders? Hard Money Lenders are lenders primarily based on the assets rather than the borrower. Michael Neill, President of AXEN Mortgage, LLC, a dba of NEXA Mortgage, LLC, explains what are hard money lenders as follows:

What are Hard Money Lenders? Hard Money Lenders care about borrowers’ financials and experience in real estate. However, their main concern is the property they are lending against.

Borrower’s credit only plays a role when hard money lenders evaluate risk, and good credit means lower interest rates. This article will discuss how to qualify for hard money loans for real estate investors.

What Are Private Money Loans?

Money Lenders are also referred to as Private Money Lenders:

• Whether they are Private Money Lenders or Hard Money Lenders both provide the same service of originating and funding loans to borrowers

Hard money is for investors who need private funding from private investors and do not qualify for traditional financing from banks and other traditional commercial mortgage lenders.

• Hard Money Lenders with prepare the loan package, including the mortgage application, borrower’s income, borrower’s credit reports, as well as the borrower’s asset documents  
• Borrowers provides the hard money mortgage lender docs that is requested and the lender will gather and review the title information and make sure there is no liens and the title is not clouded.
• The loan originator will order payoff of any mortgage liens on the property and loan statements as needed
• The loan originator will provide the borrower with all applicable federal and state disclosures.
• The lender will be responsible for ordering the appraisal or other asset valuation on the property.
• The Lender is responsible for title and escrow services.
• The Lender is responsible for processing and underwriting the hard money loan request and make sure it meets the hard money investor’s lending guidelines.
• Lending Company is responsible for preparing the final loan documents and coordinating the funding terms with the real estate investor for loan closing and funding.
• Most  lenders will service the loan they fund for a monthly fee and will issue investors with monthly, quarterly, and annual reports.

Importance of Equity With Hard Money Loans

Private and Hard Money Lenders need you to have a property with lots of equity.  For Real Estate Investors purchasing a property, 25% of the purchase price is typically the low amount for a Hard Money Lender.

Hard Money Loans For Real Estate Investors close in 30 days or less. The more money a real estate investor puts down on a hard money loan, the happier the hard money lender is.  Why is that?  The more money investors put down on a real estate purchase, it shows the borrower has skin in the game and the less risk the lender has.

A 25-40% down payment is probably much more common. Mortgage regulators do not regulate Hard Money Lenders, and hard money and private money lenders cannot lend on owner-occupied residences. Hard money or private money loans are normally for investors of real estate properties.

What Are Hard Money Lenders Versus Residential Lenders

There are many rules and regulations regarding qualifying for FHA loans since the government guarantees all FHA-insured mortgage loans against the borrower’s default. Homebuyers can get an FHA loan with as little as a 3.5% down payment with very low mortgage rates. Lenders are insured if the borrower defaults on their FHA loan. This is not how it works with hard money or private money loans.

What Are Hard Money Lenders & How Do They Qualify Loans

Gustan Cho Associates Mortgage Group is one of the nation’s most reputable hard money and commercial lenders. It is known by many as a one-stop lending shop because there is no hard money or commercial loan they cannot do. The above is just one example.

Hard Money and Private Money Lenders typically have two really strong safeguards when they lend:  A property with a lot of equity/ A borrower with a really good, common sense, well-thought exit strategy. For example, the borrower may buy, rehab, and flip a property with a $100,000 possible profit margin in a hot neighborhood.

You must think like you are a Hard Money Lender or Private Money Lender before you Google Hard Money Chicago, Los Angeles, Miami, Denver, New York, Las Vegas, or La La Land. This is because everyone lends in La La Land. So if you want a Hard Money Loan in Chicago or any other city, read what the lender states they do  If you want a Hard Money loan in Chicago. You need 100% of the future value of your property, Google, I need a Hard Money Loan in Chicago, but I live in La La Land. Remember that you must be careful when choosing a hard money lender because they are not regulated like FHA or residential lenders needing to be licensed.

Investing With Hard Money Lenders Who Are Reputable

Hard Money Loans are classified as commercial mortgages where it is not fully regulated like residential mortgages.

• Choosing the right hard money lender is key and those interested in investing with hard money lenders should do their due diligence
• The internet will offer a wealth of information where investors can Google search the company and its loan officers

Hard money loan officers do the following:

• Qualify borrowers and the property
• Issue pre-approval
• Originate and take borrower’s mortgage application
• Process the loan
• Underwrite the loan
• Send it to the end investor where they re-underwrite the loan and issue a loan commitment 
• Issue conditional loan commitment and once the conditions are turned in, will issue a clear to close
• Email and/or overnight docs out to title company as well as the wire

The hard money lender can either service the loan or have a third party servicer service the borrower’s loan.