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  • Writer's picturePreston Morris

Is it difficult to get a hard money loan?

Updated: Aug 4, 2022

The main requirement for getting a hard money loan is having the required down payment or equity in a particular property to use as collateral for the loan. The minimum amount usually ranges from 25% to 30% for residential properties, and 30% to 40% for commercial ones.

Why is it called a hard money loan?

Hard money loans are essentially a type of asset-based financing in which the borrower acquires funds that are secured by real property. It's called a “hard money” loan because it's harder to acquire and pay back than its soft money counterpart

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Do hard money lenders run your credit?

Most hard money lenders perform credit checks when they receive a loan application. A low score, bankruptcies, IRS tax liens, and previous foreclosures are all components the lender takes into consideration when understanding an investor's track record.

What is the typical interest rate on a hard money loan?

As a result, they'll often charge high-interest rates to mitigate the risks. Although these rates vary from one hard money loan lender to another, the average hard money loan interest rate for 2020 is 11-13%, according to Bankrate. Still, depending on the lender, it might be anywhere between 7% and 15% annually.

Is a hard money lender a loan shark?

Loan sharks are hard money lenders. However, it's important to note that all hard money lenders are NOT loan sharks. An individual typically goes to a loan shark as a last resort. These individuals have no assets, questionable occupations, or bad credit.

Is Hard money the same as cash?

A hard money loan is considered cash not because its similar to it. It's because it's different from traditional bank financing. Unlike traditional financing, a hard money loan isn't based on the current market price of a given property. It's based on its future after-repair value.

Why do people use hard money lenders?

Shorter repayment period – The purpose of a hard money loan is to allow an investor to get a property ready to go on the market as quickly as possible. As a result, these loans feature much shorter repayment terms than traditional mortgage loans.

What is the difference between a hard money loan and a soft money loan?

Hard money loans are made by a private investor or group of investors. Soft money generally is also secured by real property and is also dependent on the borrowers credit history, income, and down payment. Soft money generally refers to a conventional loan made by a bank or mortgage company.

How do you write an offer with hard money?

Step 1: Get a proof of funds letter from the chosen hard money lender.

Step 2: When writing up the offer, under the section that lists how you intend to pay for purchase. Write in the amount of the earnest money deposit.

Step 3: Then write, “N/A” next to “New Loan”.

Looking For a Hard Money Loan?

CLICK Here For Instant Hard Money Loan Application!

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