When you apply for a conventional loan, Lenders are very interested in your credit scores and your income. If you have a solid history of repaying your debts and your debt to income ratio is acceptable, you will be approved for the loan.
Applying for this type of loan can be an unpleasant experience. The process can be painfully slow, and, if you have negative items on your credit report or your income is difficult to prove, you might never get approved.
Hard Money Lenders approach the lending business from a different angle. We are more concerned with the collateral securing the loan. The property values are more important than a negative on your credit report. Generally, hard money loans are short-term loans lasting one to five years. In many cases this gives the borrower time to qualify for a conventional loan at a better interest rate.
Why Use Hard Money?
Some of the more significant benefits of using a hard money loan are:
Speed: Hard Money Lenders are more concerned with collateral and, therefore, are less likely to allow credit issues to hold up the process.
Flexibility: Hard Money Lenders evaluate each deal individually and are not subject to the very regulated underwriting process. Individual Lenders are able to tweak a deal to make it more acceptable to the Borrower.
Approval: As long as a Lender is confident that the property values are good and this would allow one of his Private Investors to quickly recoup their money, should the Borrower default, approvals are much easier to obtain than conventional loans.
When Does Hard Money Make Sense?
Difficultly proving income and loans requiring a fast close are examples of problems that can be solved by a hard money loan. This type of financing is also beneficial for short term loans such as fix-and-flips or when a Bridge Loan is the only way to secure a property before selling another property.
If you are considering a hard money loan, Sun Pacific Mortgage would be happy to help! Call us at 707-523-2099 and within just a couple of minutes we can prequalify you.
