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Are You Working With A Direct Private Money Lender?

Visitors to this site come up with all sorts of different ideas when they think of what a hard money lender is. Some, don’t see this service as being much different than a normal mortgage lender or traditional bank. Others think of a hard money lender as a wiseguy or someone who’s looking to charge a huge amount of interest for a lump sum of cash. At any rate, private loan companies allow you to get a specialized type of loan with much less underwriting and loan processing.

The reality is somewhere in the middle. Yes, most private lenders will charge high interest rates. The trade off though is that you can apply with a bad credit score. The amount of documents required by underwriting and time it takes to get approved is limited. The entire process from start to finish is much easier than what you would see with a typical mortgage lender or bank financing department. It’s critical to do your homework when searching for the company who best fits your borrowing needs. Find out what states your lender is registered in and make sure they have all the appropriate state and federal licenses. For example what is their NMLS or Nationwide Multistate Licensing System number? Ensure your firm is licensed by your individual state regulator. compare terms for any private lender For example, in California it would be the DBO or the Department or Real Estate. In Florida they would need to be a licensed Florida Mortgage Lender.

Most private money lenders offer short term loans which can also be viewed as bridge loans. With this type of financing an online lender provides funding-based on the collateral for the loan. In other words, someone will give you a loan based on the value of your building, warehouse, or lender occupied dwelling. It often will qualify as long as it is some form of real estate. Of course these rates and finance charges at a higher interest rate than what you see from a typical online financial company. Most private money deals are usually non-conforming to bank requirements. Hard money lenders will provide a range of deals based on the loan-to-value percentage. Consider the type of real estate backing up the deal and the minimum loan size when looking at closing costs. These loans are more expensive but often the only type the client can receive. They are not based on the regular credit score requirements or real estate underwriting standards. So the low-end customers with not much collateral can be considered for online financing for something like a rehab loan. The borrower does not even have to prove his/her income or address. So now we have a reason for the high expenses and the lack of bank or mortgage lender underwriting.

There is a very high rate of default on hard money loans associated with a residential property. We know this is one of the reason for the higher interest rates and closing costs. Both individuals and small companies will resort to hard money lenders for various reasons. Some because they lack the credit history or past bankruptcy. The credit rating or other documents which would make a bank loan much more promising are no longer an issue with private money lending. But collateral for a residential property is based on-the size of the loan. Most financing amounts and down payments will vary due to the final loan amount. You can expect to qualify with a high interest rate if you agree to a long term repayment schedule . Is there a larger amount needed upfront for collateral? find the best real estate for your direct hard money loan Once you get to this step you’ll have a good idea of what you can bring to the table. Now may be the time to use our online directory and compare different private money lenders. You should be able to settle on a company that is reputable and checks all the boxes for what you’re looking for.

Hard money lenders may serve a small state area or offer loans on a national basis. They have area brokers who take a percentage of the loan, called points, which adds to the cost of the loan. They take care of the paper work and meeting with the applicants in the early stages. Hard money lenders can be for individuals or for commercial usage. You can also look into using a private lender for financing options like 2nd trust deeds, fix and flip and bridge loans. Commercial Hard Money Lenders are the ones to go to for commercial loans. But they can access collateral out on the commercial as well as your own real estate, your home. Thus there is a risk of foreclosure or losing your primary real estate. Some states do not allow Hard Money Lenders. Online companies in these specific states are are being strictly watched for the near future. We cannot afford any more foreclosures in California. More companies are lending money on little or no credit. We acknowledge that hard money lenders need to be more strictly monitored. For every foreclosure or default, 50 people and their livelihoods are affected. It is a ripple effect we let things get too much out of control.

What are the Different Types of Hard Money Loans?

We all know that hard money loans are short-term loans that use real estate as collateral.  Borrowers seek out this unique type of funding for the purpose of buying and fixing up a property. These days a lot of investors use these loans buy and renovate properties over the course of about a year. These are excellent borrowing options for those who are into flipping houses, and there are a number of them to choose from. If you are interested in a hard money loan, you will need to know what your choices are.


Fix and Flip Hard Money Loans

You will find that fix and flip hard money loans can come with fairly high interest rates, but they are paid back over a fairly short period of time. There are no additional fees charged for paying back one of these loans early, and doing so can reduce the amount of interest you pay. These private lender loans usually have a term of 1 to 3 years, and it takes around 15 days to get the funds. home equity cash out Interest rates can vary from 7 to 12 percent, and lender fees go from 1.5 to 10 percent.

There are certain qualifications that you will need to meet before you can get a flip and fix hard money loan. You will need a credit score of at least 550, and a debt-to-income ratio of anywhere from 35 to 45 percent. It is also important that you’re able to demonstrate experience with rehab projects or licensed contractor help. Those who have at least a couple years of experience with rehab projects will benefit the most from this type of loan. Even people without this type of experience can still get a fix and flip loan though.

Many of the private lenders who give out real estate loans are based entirely online. You can fill out an application through the lender’s website and wait to hear back. If you are approved, you should receive your funds within a couple of weeks.

Cash Out Refinance

A cash out refinance hard money loan is when someone who fixes and flips real estate refinances a current property that is in play to buy a new property as an investment. This type of loan helps these investors to get maximum equity from their current property by borrowing money so they can pay off the mortgage. When the new cash out loan is given to the investor, it is referred to as a “first lien.” Any current liens, including the first mortgage, have to be paid back in full before any equity can be extracted.

The investor uses the difference between the new loan and mortgage to pay for other properties that they can flip and fix up before selling. One of the best things about this loan is that there aren’t any limitations on how the borrower can spend the money they are given by the lender. Investors are able to use a cash out refinance or “cash out refi” both owner-occupied and non-owner occupied properties for up to four units.

Cash out refi loans have a term that can range from 15 to 30 years, and it typically takes anywhere from 30 to 45 days to get approval. The interest rates for these loans can go from 2.99 to 5 percent. The loan origination fees are 3%, and the closing costs fall between 2 and 5 percent. This is a viable borrowing option for many fix and flip investors.  Many of us have traditional refinance options available such as working a mortgage company, bank or Federal Government program.  But there’s always going to be a situation where you need cash fast and that’s where a cash out refi from a private lender can help out.

Second Trust Deeds

This form of real estate financing is like a long term mortgage in many ways. As it lets the borrower get private lender funding to purchase a property by putting it up as collateral. With a 2nd deed trust, there are often a different groups involved with the real estate investment. There is person who initially, the private real estate financier, and a trustee. You will often see a title company or banking institution retain the title to the property until the loan has been paid off in full.

The laws regarding which security instruments can be used vary from state to state. A second trust deed can be either a home equity loan backed by a financial institution or a second mortgage. If someone has a second trust deed, there is already one in place that uses the property as collateral. The first trust deed acts as the original mortgage for the property.

Build to Flip

A build to flip hard money loan is a good option for experienced property investors who want to build a whole new property from the ground up. financing for commercial construction These loans are short-term and can help investors finance the construction of new properties for the purpose of later selling them. Some of the funds from this type of loan are given at the closing phase to cover the cost of lot acquisition.

The amount of the loan is based on the lot value as well as any repair or construction expenses. There is no minimum credit score that is required to obtain one of these loans, which is why they are so incredibly popular with investors. This type of loan doesn’t require a lot of paperwork, so it is a much faster process overall.  Compare different companies that provide build to flip and cash out financing in our directory.

Rental Refinance

Those who want to build up their real estate portfolio might consider getting a rental refinance hard money loan. You refinance a rental property of yours within as little as 10 days, as the process for getting one of these loans is quite expedient. There is no minimum credit score required, and it’s a great borrowing option for many people.

There are some requirements for these real estate loans that you should know about. You can only choose the rental refinance option for single-family residences with 1-4 units, and only investment properties. This is a great option for investors who want to pay off the mortgage on their investment properties at a lower interest rate. If you are having difficulties making payment on the original mortgage, this loan can certainly help. You will have to submit proof of income when applying for rental financing.

Are There Mortgage Loan Programs Available for Foreign Nationals?

This questions comes up more often than you would expect.  Many people come to our site because they were turned down for traditional real estate financing.  Some of those applicants were turned down because they don’t have an established relationship with this country.  That means they’re either new to the States or for whatever reason they haven’t been able to document a lengthy employment and credit history.  In that case their odds of There are mortgage loan plans that do exist for foreign nationals who want to buy a home. These loans offer some great borrowing opportunities, and it’s important that you learn as much as possible about them before going forward.

Credit is Not an Issue

Foreign national hard money loans do not require non-American citizens to have good credit at all. Those who aren’t citizens of the country obviously don’t have a credit score, so it’s a non-issue. Applicants will, however, be required to submit detailed information about the property they wish to purchase. These lender take a close look at the potential income that will be generated by the property when deciding whether or not to approve applicants. The more potential value your property has, the easier it will be to get your loan.

Down Payment

While you might not be required to have a credit history or official documents to get a hard money loan, you will be required to make a down payment. The size of the down payment you will be required to make will depend on the amount you wish to borrow as well as the lender. It’s always a good idea that you ask each lender how much money you will need to pay down to get the loan. Usually you will have to put down anywhere from 20-30% of the total loan.

Paperwork Requirements

You will be a lot more likely to get a private money loan if you can submit some sort of proof that you will be in the country for at least as long as the loan period lasts. This can be difficult for some people to do, but it will go a long way towards increasing your chances of approval. verification requirement for direct lenders By doing this you will be giving the lender peace of mind. They will be a lot less likely to view you as such a liability if they know you are going to be in the country for a while. You will be required to show your passport to get a private money loan though, so make sure you have it on hand. It’s always best to stay on top of the latest requirements when it comes to your ID and passport.   Please check out the most recent State Department Guidelines for photo ID and passport requirements.  You absolutely cannot get one of these loans without a valid passport as any lender or financial institution would need to verify your identity.

Benefits of Foreign National Hard Money Loans

There are lots of benefits associated with getting a hard money loan if you are a foreign national. These loans are given out by private lenders, which means that you won’t need to submit any documents proving residency at all. If your property has enough potential value and you’re able to put down enough money, you should be able to get your money fast. These loans are known for dispersing funds a lot faster than banks and other financial institutions.

Those who are not legal citizens of the country but want to purchase a home for the purpose of flipping it should make a point of exploring this option before making a final decision. These lenders are willing to work with most everyone with regards to repayment plans. You should be able to work something out with a private lender so you can pay off your loan on time and without any issues.

Finding a Lender

Some of the private lenders in the HardMoneyList database will work with Non US Citizens that are looking for fast funding.  As these companies are not held to the same regulations as banks, you will need to choose the one you borrow from carefully. Same goes if you’re looking for a cash out refi or commercial real estate loan.  When you take the time to research some of your lender options, you should be able to choose the right one to meet all of your needs. There are a lot of these lenders out there, and you definitely don’t want to rush into this kind of decision.

Paying Back Your Loan

You will have anywhere from 1-5 years to pay back the hard money loan you take out. One of the great things about these loans is that they usually don’t come with any prepayment penalty fees. This means that you will actually be able to pay off your loan early if you can, and there won’t be any additional expense whatsoever. Keep in mind that you have to be purchasing an investment property to get one of these loans as a foreign national.

What type of interest rate can I expect with a hard money loan?

Most consumers look into taking out a private money loan because of the benefits of quick funding or fast processing times. Many of us know that this type of financing has high interest rates, but do you know the exact rates to expect come closing time? It’s important to realize what you’re getting into. That’s why you need to do research on all your lending options before you reach the underwriting process. You don’t want to get tangled up with shady lenders or companies that aren’t forthcoming with their rates. Pay very close attention to all of the inside information we have to offer you below as it’s critical to get the best lending terms from your hard money lender.

Yes, a few companies definitely gave the hard money loan industry a bit of a bad name in years past. But new rules, regulations, and new laws (as well as a considerable amount of new oversight) has helped to clean of the industry significantly. private money lending rates We hope you can now use the opportunities to compare different companies on our hard money list. These lenders aren’t ranked in any specific order, but we try to list the benefits and drawbacks of each firm. Remember, anytime you’re working with an online company it’s important to know what their parameters are. Are they licensed to provide funding in your state? Can they provide upfront disclosures that show your interest rate and lending terms? These are the questions you need to ask any prospective lender that you’re thinking of working with.

Hard money loans today are essentially nothing more than short-term loans secured by real estate and property, funded by private investors (or a pool of private investors) and are an alternative to conventional lenders like banks and credit unions. The overwhelming majority of these loans have a duration that stretched just 12 months, the loan terms can in some circumstances he stretched out to anywhere between two and five years. Monthly payments must include interests and at least some part of the principal, though the overwhelming majority of hard money loans are designed to be almost completely interest only payments with a “balloon payment” at the end of the term.

Should I pay off my loan early to avoid the high interest rate

Believe it or not, even though new rules and regulations have come slamming down on the hard money lending industry – and the lending industry in general – more and more people have the opportunity to take advantage of these kinds of loans today than ever before. Folks with all kinds of credit, including no credit and disastrous credit, have an opportunity to leverage hard money loan, giving everyone an equal shake at taking advantage of this financing opportunity that they might not have been able to in the past.

You’ll be glad to hear that you don’t need a picture-perfect credit history to take advantage of these loans, though you will still have to go through an application process. These kinds of loans are best for those that are fixing up a property and flipping it, land or construction loans, or when a real estate investor needs to grab a property quickly – and you’ll certainly want to shop around for the best kinds of deals available.

What Are The Typical Rates Your Seeing With Most Lenders

Your interest rate is going to be entirely dependent upon the kind of hard money loan that you move forward with.  Most typical mortgages have rates that are locked in.  You can learn more about interest rates and how the Government works with lenders at the CFPB website.  They have a great resource that lets you explore rates and other aspects of the most common mortgage loans.  Also note the specifics of your arrangement and the details of your repayment term as well as your balloon payment at the end of the term. But you should expect your hard money lending rate to fall anywhere between 8% and 18%. Your credit score isn’t going to disqualify you from the interest rate that you receive from hard money lenders, though it is going to be a determining factor as to how much interest you end up paying on these loans in the first place. The property you are purchasing and the property that is securing the loan will also be calculated into this equation, and the experience and repayment history of the person taking out the hard money loan will come into play as well. As we highlighted above, it’s always a good idea to shop around for the best possible interest rates when you’re taking advantage of this kind of funding. Just expect between 8% and 18% to be associated with this loan in most circumstances.