A hard money loan is a short-term loan (typically 6 months - 2 years) secured by a real estate property. As opposed to conventional lending such type of loans are funded by private investors. The amount of money that can be lent to the borrower depends on the value of the collateral asset. Such asset can be borrower’s own property or the property which he wishes to acquire.

A hard money loan requires a monthly payment of interest only with the remaining loan amount “balloon payment” at the end of the term or loan extension.

However the lending requirements of hard money loans are usually less stringent than those of conventional loans, but still a borrower need to consider these 5 questions before applying for such loans:

1. Monthly loan installment? How will you make your monthly payments is the most important question to ask yourself, since any irregularity in payment can make you lose your collateral. So it’s better to have a solid plan in prior for your monthly payments.

2. How will my credit affect my loan application? Credit scores are not important on Hard Money loans as these are Asset based loans that utilize the value of the property as the primary qualification. Bankruptcies and other credit related issues are not significant in obtaining a Hard Money loan.

3. What will be the exit strategy? Hard money loan is usually a short term period loan, so it is very important that you come up with some exit plan. It is very important to calculate how you are going to pay it off in the stipulated time. Will you be going for refinancing or you will be paying it off with cash? This complete plan should be clear in your mind. This is one of the “primary considerations” lenders use in approving a Hard Money loan.

4. Are you working with a reputed lender? It is very important to know whether your lender is reputed or not. Working with a reputed and experienced lender will ensure that your loan is falling under the boundaries of law. Do your own researches, ask your friends and relatives, and try to collect as much information as possible. Once you are confident about your lender then only move forward in your dealings.

5. Who should consider a hard money loan? Hard money loans are ideal for situations such as:

  • Land Loans (generally no other financing available)

  • Construction Loans

  • When the Buyer has credit issues.

  • When a real estate investor needs to act quickly

  • Bad Credit

  • Rehab

  • New construction

  • Need to close FAST

Real estate investors choose to use hard money for many different reasons. The main reason is the ability of the hard money lender to “fund the loan quickly”. In most situations, hard money loans can be funded within 1-3 weeks.. Compare that to the 30 – 60 days it takes to get a bank loan funded. The application process for a hard money loan generally takes a day or two and in some cases, a loan can be approved the same day.

The ability to obtain funding at a much faster rate than a bank loan is a significant advantage for a real estate investor. Especially when the real estate investor is trying to acquire a property with many competing bids, imminent Foreclosure or a quick close with a hard money loan will get a seller's attention and set their offer apart from the rest of the buyers offering slow conventional financing.



Hard Money Loans in Dallas, Texas for most types of Commercial Properties.

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