Hard money loans are an alternative financing option primarily used by real estate investors and developers who need fast, flexible funding. Unlike traditional bank loans, which focus on a borrower’s creditworthiness and financial history, hard money loans are asset-based. This means they are secured by the value of the property rather than the borrower’s credit score or income documentation.

Features and Requirements of Hard Money Loans

If you’re considering a hard money loan, here are some key features and requirements to keep in mind:

Loan-to-Value (LTV) Ratio

• Hard money loans typically offer funding up to 65% Loan to Value (LTV). This ensures that lenders have a sufficient equity cushion to protect their investment.

Loan Term

• These loans are generally short-term, with a standard term of 12 months, though longer terms may be available on an exception basis.

Interest Rates

• Hard money loans come with higher interest rates, usually ranging between 11.99% – 12.99% (Interest-Only Payments). The higher rate compensates lenders for the increased risk and speed of funding.

Loan Size

• The loan amounts can range from $200,000 to $6,000,000, and potentially even higher with special approval.

Property Valuation

• The valuation process is quick and efficient, using either a Broker Price Opinion (BPO), inspection, or full appraisal to determine property value.

Flexible Borrowing Requirements

• No Minimum Credit Score – Traditional lending standards do not apply.
• No Tax Returns or Income Documentation Required – Perfect for self-employed individuals or those with unconventional income sources.
• Foreign Nationals Accepted – Non-U.S. citizens can also qualify.
• No Debt Service Requirement – Borrowers do not need to meet stringent debt-to-income (DTI) ratios.
• No Experience Needed – First-time investors can qualify without prior real estate experience.

Fast and Efficient Closings

• Closing in as little as 7 to 10 days, with exceptions for even faster closings if needed.
• Close in Entity – Loans can be structured under an LLC or other legal entity.

Additional Loan Benefits

• Cross-Collateralization Accepted – Allows borrowers to use multiple properties as collateral.
• Seller Seconds Allowed – Enables creative financing strategies by allowing secondary financing from the seller.

Who Should Consider a Hard Money Loan?

Hard money loans are ideal for:

• Real estate investors looking to acquire, renovate, or flip properties quickly.
• Borrowers who may not qualify for traditional bank financing due to credit history or income documentation.
• Developers needing quick funding to secure a property before permanent financing is arranged.
• Individuals seeking flexible lending terms for unique real estate opportunities.

Conclusion

Hard money loans provide an excellent solution for those who need quick access to capital without the lengthy approval processes of traditional banks. With flexible underwriting, no income documentation requirements, and a fast closing timeline, they are a powerful tool for real estate investors looking to seize profitable opportunities. If you’re interested in learning more about hard money financing, reach out to our team today!