Real Estate Investors Turning to Hard Money Loans

Getting approved for a home loan these days can be challenging. As a borrower, if you have bad credit or are looking for a non-owner occupied loan, your situation is likely dire. With the credit crunch brutalizing the financial industry, banks have been forced to tighten up their lending standards. That means that if borrowers don't have pristine credit, and ample income and reserves, the chances of them getting approved for a loan is minimal. With credit standards so tight, there are a huge number of potential borrowers that are simply out of luck. If you happen to be an investor looking to take advantage of today's incredible real estate investment opportunities, the situation might seem hopeless - but it doesn't have to be.

Hard money lenders have become a very popular option for investors in today's market. The simple reason for this is that hard money lenders are filling the gaping holes not being covered by traditional lenders. Hard money lenders are in business specifically because they take on loans that banks won't. These hard money lenders tend to focus more on property fundamentals and equity position - rather than a borrower's credit history. Hard money loans will certainly cost more than traditional loans, but for investors looking to cash in on a great investment opportunity, the extra loan costs might be more than worth it.

  

Traditional or Hard Money Loan

   Hard money loans might be easier to get than traditional loans, but that doesn't mean that investors should overlook traditional loans entirely. As a borrower, if you are able to get a traditional loan, you should. Rates are so ridiculously low right now on traditional loans, those investors who are able to get long term fixed traditional loans are starting out with a huge advantage. Hard money loans will not only come with a much higher interest rate, but also more points up front. The total APR on hard money loans will be considerably higher.

   Typically the main reason an investor would choose a hard money loan over a traditional loan - assuming they could qualify for a traditional loan - is timing. If an investor needs access to funds in a very short amount of time, getting a hard money loan might be their only option.

Qualifying for a Hard Money Loan

   Qualifying for hard money loans tends to be more straight forward than traditional loans. When looking at hard money loans, remember that hard money lenders are themselves investors. When hard money lenders evaluate loan opportunities they are looking to maximize returns and minimize risk - just like every investor. While hard money lenders would love their borrowers to have great credit, it isn't the number one factor they use to evaluate lending opportunities.  www.rhnws.com.au