You need to understand first that getting hard money loans isn't difficult IF you know the places to look and the best amongst them to find the right hard money lenders is via online world.
But the problem is, most of the companies that claim to be a hard money lender, aren't one in truest sense.
Hard money doesn't ask you to show your job or credit or income credentials. That's why, you can get them easily. They don't follow a traditional route. A real hard money loan is funded entirely based upon the property you are planning to buy and refinance.
Therefore, you should stay away from those who'll ask you meet their credit score criteria before they'll fund you.
All hard money lenders will definitely check your documents or credit score at some point but they would do it to decide what your interest rate would be or the points you'll pay or the maximum term of the loan.
You can also look for a lender at your local REL (Real Estate Investment) club. It is better to interact with other investors to find out about their lenders.
After giving you all the secrets about finding a hard money lender, now let's get back to the main question.
The process of getting a hard money loan is very different from getting a conventional mortgage for your home. You need to apply for loan after you have planned to buy it and have taken it under contract.
True hard money lenders move fast and help you in getting financing within 7 business days as well. But you need to have a property in mind before applying for a loan because they can't work on what-if scenarios.
As far as you haven't have a bankruptcy within the last two tears or any tax liens within the past few months, then your application for hard money loan cannot be denied.
There are a couple of things that throw people off after they've submitted their first loan application.
1) The amount of loan funded from a lender will differ from the amount you need
Hard money lenders generally lend up to 70% of the ARV (After Repair Value) for your deal. You can use this amount to purchase and rehab the property.
On the other hand, the lenders will send few independent evaluators to finalize an ARV for the property you want to invest in. They will look for at least 10 comparables before getting an idea about ARV.
This number could differ from the one you were expecting. If the purchase price and rehab cost of the property is less than 70% of ARV, you'll need to close the difference between them.
This is the biggest misconception amongst people. They believe that if a hard money lender is promoting that they can fund you 100% of the purchase price and repair cost, then they will work in the same way every time.
Mind it, that's not always the case. If you are willing to get 100% financing, then you need to make sure that your purchase price and repair costs lies within 70% of ARV.
2) No planning for points on loan or loan fees
Hard money lenders get paid on loan points. There isn't any other way. You can NEVER get financing for points and it would be at least $5000.
Being a borrower, you'll have to pay it by yourself at the closing table.
If a lender is advertising "no money down", then that doesn't include points. They are only talking about loans.
But the problem is, most of the companies that claim to be a hard money lender, aren't one in truest sense.
Hard money doesn't ask you to show your job or credit or income credentials. That's why, you can get them easily. They don't follow a traditional route. A real hard money loan is funded entirely based upon the property you are planning to buy and refinance.
Therefore, you should stay away from those who'll ask you meet their credit score criteria before they'll fund you.
All hard money lenders will definitely check your documents or credit score at some point but they would do it to decide what your interest rate would be or the points you'll pay or the maximum term of the loan.
You can also look for a lender at your local REL (Real Estate Investment) club. It is better to interact with other investors to find out about their lenders.
After giving you all the secrets about finding a hard money lender, now let's get back to the main question.
The process of getting a hard money loan is very different from getting a conventional mortgage for your home. You need to apply for loan after you have planned to buy it and have taken it under contract.
True hard money lenders move fast and help you in getting financing within 7 business days as well. But you need to have a property in mind before applying for a loan because they can't work on what-if scenarios.
As far as you haven't have a bankruptcy within the last two tears or any tax liens within the past few months, then your application for hard money loan cannot be denied.
There are a couple of things that throw people off after they've submitted their first loan application.
1) The amount of loan funded from a lender will differ from the amount you need
Hard money lenders generally lend up to 70% of the ARV (After Repair Value) for your deal. You can use this amount to purchase and rehab the property.
On the other hand, the lenders will send few independent evaluators to finalize an ARV for the property you want to invest in. They will look for at least 10 comparables before getting an idea about ARV.
This number could differ from the one you were expecting. If the purchase price and rehab cost of the property is less than 70% of ARV, you'll need to close the difference between them.
This is the biggest misconception amongst people. They believe that if a hard money lender is promoting that they can fund you 100% of the purchase price and repair cost, then they will work in the same way every time.
Mind it, that's not always the case. If you are willing to get 100% financing, then you need to make sure that your purchase price and repair costs lies within 70% of ARV.
2) No planning for points on loan or loan fees
Hard money lenders get paid on loan points. There isn't any other way. You can NEVER get financing for points and it would be at least $5000.
Being a borrower, you'll have to pay it by yourself at the closing table.
If a lender is advertising "no money down", then that doesn't include points. They are only talking about loans.