Hard Money Loans For Real Estate Investments Lending Guidelines

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This BLOG On Hard Money Loans For Real Estate Investments Lending Guidelines Was UPDATED And PUBLISHED On January 20th, 2020

What are the hard money loans for real estate loan loans guidelines?

The benefits of using hard money loans for real estate investments are worth the high price of hard money lending rates and terms for many short term rehab real estate investors.

  • Many people believe that hard money means loan shark money but that is so far from the truth
  • The Hard Money Market is a much needed commercial lending niche where many real estate investors rely on hard money loans as part of their business platform
  • There are many benefits of using hard money loans for real estate investments by real estate investors
  • One of the greatest benefits is by able to get short term commercial bridge financing in a matter of a week or two where traditional banks and lenders cannot do

In this article, we will discuss and cover Hard Money Loans For Real Estate Investments Lending Guidelines.

What Are Hard Money Loans?

Hard Money Loans are short term loans that are secured by real estate.

Hard Money Lenders are private investors or group of private investors who use their own private money to lend to real estate investors who need short term funding for the following:

  • Purchase commercial properties
  • Purchases properties that need quick closings 
  • Purchases properties in need of rehab and needs acquisition plus rehab loan
  • Purchases properties that are not bankable by banks or traditional lenders

Hard money lenders are different than commercial bankers because commercial banks use funds from their depositors to lend on real estate.

Why Use Hard Money Lenders Versus Using Bank?

Why Use Hard Money Lenders Versus Using Bank?

Hard Money Loans For Real Estate Investments is not just for real estate investors with bad credit or investors with no income verification.

  • Hard Money Loans for real estate investments offers many benefits for seasoned blue-chip real estate investors
  • Why would real estate investors go to hard money loans for real estate investments than money from a traditional bank?

Why Investors Choose Hard Money Versus Bank Loans

Here are the many benefits for real estate investors to use hard money loans for real estate investments by hard money lenders than funding from banks:

  • The primary reason is due to less hassle
  • Investors can borrow short term money without pre-payment penalties
  • Most commercial loans have high pre-payment penalty fees
  • Rehab projects are not stabilized and real estate investors require time to get them rehabbed and stabilized
  • Hard money lenders only require a limited amount of paperwork and do not require much information on the borrower

Hard money lenders are more concerned with underwriting property than the borrower.

Who Benefits From Hard Money Loans For Real Estate Investments?

Who Benefits From Hard Money Loans For Real Estate Investments?

Here are the types of real estate investors who benefit from hard money loans:

Property Flippers:

  • Property flippers are professional real estate investors who purchase properties and rehab them
  • After rehabbing them, they put them on the market and sells them for a profit
  • Most property flippers want short term hard money rehab loans rather than taking out 15 to 30 year fixed rate mortgages

Home Builders:

  • Most home builders prefer on taking out hard money financing to purchase the lot, build, and sell once the home is done

Real Estate Investors:

  • Investors may run into a situation where they run into a seller that needs to sell quickly for a reduced price on a property
  • A hard money lender is someone who can fund a real estate deal in less than a week

Real Estate Investors With No Credit Or Bad Credit:

  • Investors with bad credit or recent bankruptcy or foreclosure will have hurdles securing financing from banks and traditional lenders

Rates And Terms On Hard Money Loans For Real Estate Investments

Terms on hard money are much shorter than traditional bank commercial loans.

Here are typical terms of hard money financing:

  • Typical terms of hard money financing are six to 24 months
  • Hard money normally interests only payments for the term of the hard money loans
  • Mortgage interest rates on hard money loans are generally higher than bank financing
  • Hard money interest rates vary from 8.0% to 20.0% 
  • Rates on hard money depend on the amount of down payment, type of real estate investment, and credit scores of the borrower 
  • Hard money lenders will chard upfront points
  • Points depend on the risk of the investment and the size of the loan and can vary from 3.0% points to over 8.0% points
  • Down payment requirements by hard money lenders vary from 20% down payment to 50% down payment

Real estate investors in need of hard or private money loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

2 Comments
  1. John says

    It’s good to know that hard money loans are beneficial since they allow short term bridge financing that banks cannot do. I have a cousin that has been looking at getting into real estate acquisitions, but doesn’t have that great of a credit score. Would it be more difficult for him to qualify for a hard money loan if his credit isn’t as high as it ought to be?

    1. Gustan Cho, NMLS 873293 says

      Hard money loans are called asset based lending where the lender is more concerned with the asset rather than the borrower. If you have any questions, contact us at 800-900-8569.

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