Hard money questions, pls help - Posted by sheri

Posted by jasonrei on August 11, 2003 at 18:36:22:

I’ve used hard-money a few times and Mr. Simms summed it up better than I would have.

Hard money questions, pls help - Posted by sheri

Posted by sheri on August 10, 2003 at 22:50:56:

I’m new to REI and have some questions about hard money loans. Does that just mean you’re borrowing from a person as opposed to a bank? Also, can you get hard money loans with not so good credit, and what usually are the terms? Do you have to qualify or use your own home as collateral? How long does it take to get a hard money loan, start to finish?

We want to buy houses, fix them up and resell for a profit, but getting another mortgage right now would be hard for us, and we just don’t have the cash to do it without a loan. Is it possible for us to start out getting hard money loans, or what would be our best option? Thanks.


Re: Hard money questions, pls help - Posted by Russ Sims

Posted by Russ Sims on August 11, 2003 at 17:38:49:

Hard money comes from private lenders. Often the lender will be a single investor or a company representing a pool of investors. You generally don’t need great credit to get hard money loans, though it often helps to have good credit. These lenders will usually lend up to a maximum of 65% of market value, so if you’re looking to buy a home worth $100,000 it won’t be easy to borrow more than $65,000 through a HML. HML money isn’t cheap. Expect to pay 5 to 10 percentage points for the money you borrow. Most mortgage companies charge from 1 to 3 points, just for comparison. Interest rates for hard money are high, with 12% or 13% being pretty common. On the up-side you can ususally get your funds fast. Many HMLs can close in 2 weeks or less. Some HMLs won’t care about your credit, however some will. Call around. If you are looking to borrow more than 65%LTV a HML may ask you to cross collateralize the purchase with another property, such as your home or another investment holding. But if you keep that LTV below 65%, chances are you won’t have to pledge anything other than the home you’re buying.

I can’t stress enough that you need to meet your HMLs before you try to get financing through them. These lenders don’t have federal disclosure guidelines so grill them on what types of fees to expect. You should have a couple of lenders lined up before you start making offers. Otherwise you’ll make an offer, get it accepted and then feel compelled to work with the first HML that approves the deal…(gee, do you think that’s happened to me? You bet.I wound up paying loan shark rates because I was desperate).You really need to know the cost of your money before you start making offers…
Good luck