Conventional Loans vs. Hard Money Loans – Which is Right for You?
You may believe that when it comes to buying a home or property, that a conventional loan from a bank is the only way to go. But a hard money loan may be a better option for you depending on your specific circumstances.
Many people have never even heard of a hard money loan (also known as a private loan) and are naturally interested in learning more. What are the advantages of a hard money loan? What’s the difference between a conventional loan and a hard money loan? How do I apply for a hard money loan?
This article will answer those questions and much more.
Who Qualifies for a Hard Money Loan?
A hard money loan has several notable advantages over a traditional, conventional loan. In fact, you may be surprised to learn just who qualifies for a hard money loan:
- People with a high amount of debt
- People with poor or no credit
- People who have been denied a conventional home loan
- People who have difficulty proving they meet specific income requirements
The reason for this is because hard money loans typically focus on the “loan to value” ratio of a particular property. The more equity a borrower has in a given property, the higher the likelihood that they’ll be approved for a hard money loan. Click here to go to main page for more information on hard money approval guidelines.
Faster Loan Approval Process
One of the best reasons to consider a hard money loan is that it can be approved faster than a traditional, conventional home loan. In highly-competitive real estate markets where sellers receive numerous offers, it’s often the buyer who gets approved quickest that ultimately nabs the home or property.
Because hard money loans do not have strict income verification requirements and don’t need to check credit scores or other typical loan application hurdles, they can shortcut the approval process, helping buyers to secure the funding they need faster than a conventional loan.
Bad Credit? No Problem!
One of the biggest challenges for borrowers looking to get their loan approved is the dark cloud of bad credit hanging over them. But a low credit score is simply not a factor that hard money lenders concentrate on.
The financial crisis of 2008 caused many banks to become more strict about their lending requirements. Unfortunately, this, coupled with the drastic roller coaster of credit card changes and updates lead many people to suddenly find their credit in shambles. That
Private lenders understand that not everyone has perfect credit, which is why they look primarily at the equity and loan-to-value (LTV) ratio of a given property and the borrower’s investment in it, rather than at finances that can be skewed by outside factors like credit scores and income details.
For people who invest often in real estate, bad credit can keep them from getting the financing they need even though they may have plenty of equity. Hard money lending lets them put that equity to use to secure financing in a way that’s open and transparent.
Denied By the Bank? You Have Options!
Let’s face it — banks are in the business of making money. They are the farthest thing from being real estate investors. And if an investor comes to them wanting to quickly secure financing on a hot property or just-listed home, the bank only sees things in black and white. So even if you’ve been denied by the bank because of bad credit (or no credit), you still have options on the table.
A hard money loan may be precisely the solution you need to get financing quickly and affordably. By requiring far less paperwork, income requirements and other verification steps, private loans enable real estate investors to act on hot properties the moment they become available, giving them a competitive edge in a bustling real estate market.
To learn more about how a hard money loan may help your specific situation, contact us today! We’ll work with you to help better understand your unique needs and goals while giving you the opportunity to secure affordable financing for your real estate investments. Whether you had bad credit, high debt, or were denied by the bank or other traditional lender, you still have options available. Reach out to us and let’s discuss them in more detail at your convenience!
For more detailed information on hard money loans and approval guidelines, please call our financial office or email our sales department today.