Hard money lenders, also known as private lenders or private money lenders, play an important role in real estate finance. Unlike banks and other types of conventional lenders, hard money lenders are not focused on a borrower’s financial condition but rather the real estate they are purchasing or currently own. Below are the Top 5 Reasons for a Hard Money Loan to fund a real estate purchase or refinance.
Poor Credit or Lack of Income
Many borrowers and owners of real estate suffer from poor credit or inconsistent income. This maybe a result of a bankruptcy or foreclosure or the borrower is a business owner with inconsistent income. As a result, these borrowers often cannot obtain bank financing and must use an alternative lending source such as a hard money loan. Because hard money lenders aren’t heavily focused on the borrower’s credit or income, but rather the real estate being used as collateral and the loan to value ratio, a har money loan may be a good option.
Sometimes speed is key when a borrower needs to purchase a property or refinance an existing loan. Most banks require an extensive approval process for a loan request which may take weeks. For some borrowers, waiting for bank approval is not an option. On the other hand, hard money lenders specialize in moving quickly when approving a loan request and can typically fund a loan request within 5 to 7 business days.
If a borrower is purchasing or refinancing a property that needs significant repairs or is under performing, they will likely have trouble obtaining a bank loan. In these cases, a hard money lender maybe a better option for the borrower. Hard money lenders can typically structure a loan around the issue that offers a win-win solution for both the borrower and lender. In some cases, a hard money lender may structure a loan that includes funds to renovate the property.
Rehab or Construction Financing
Many borrowers will find it difficult to obtain bank financing for a rehab or construction loan. These types of loans have the greatest level of risk for a bank. Hard money lenders have filled this void by offering construction financing which includes funds for the rehab and are often based upon the completion value of the property. These types of loans are called fix and flip loans or rehab loans.
A bridge loan is a short-term loan that helps a borrower purchase or refinance a property. A borrower may require a bridge loan because they need to fix their credit or the property before they couldbe approved for a bank loan. In these cases, a borrower may obtain a bridge loan for a short period of time and refinance the loan with a conventional bank loan.
Hard Money lenders play a critical role in the real estate industry. They offer customized funding options for borrowers that do not qualify for bank financing. Such financing may include funds for a purchase or refinance. Because hard money lenders are more focused on the real estate asset and not the financial condition of the borrower, a hard money lender maybe a better option for them.
About TaliMar Financial
TaliMar Financial is a California hard money lender in San Diego, CA focused on funding residential and commercial loans for fix and flips, construction, and bridge loans. For over 10 years, TaliMar Financial has been the leading source of private money loans for real estate investors, mortgage brokers, and real estate agents. Contact TaliMar Financial today at (858) 201-3253 or visit talimarfinancial.com to learn more about our hard money lending programs.