Because you have sufficient cash flow, you will be able to buy the property of your choice. It would also be much easier for you to act quickly in case a good deal pops out. And most of all, having a lender of hard money by your side allows you to easily obtain prequalification letters, which can improve your credibility as an investor when making offers.
There are many reasons why most real estate investors turn to hard money lenders for help. One of these reasons is that these private lenders are not interested with the borrower’s credit history or financial status. A real estate investor can still borrow money from these non-traditional financiers without having to worry about their poor credit scores.
You might be wondering why these lenders are willing to risk their money on borrowers who were probably turned down by banks and other lending institutions. Basically, hard money loans are asset-based. It means that the value of a property, for which the loan is being made, has precedence over a borrower’s credit score. In the case of lenders of hard money, as long as the property has a high after repair value, they will approve a loan application regardless if the borrowers are capable of quickly paying the mortgage or not.
Another reason why real estate investors prefer borrowing funds form hard money lenders is that they can obtain coverage for a property’s repair costs. Unlike the financing provided by banks, credit unions, and mortgage companies, hard money loans allow investors to spruce up a property’s looks without having the need to spend money up front. In addition, at times lenders of hard money provide 100% financing on some deals. Now try getting that from banks.
A good selling point of hard money loans is the funds can be released immediately. A private lender can approve a loan application in less than a week upon the receipt of the needed documents whereas banks need months to decide on a loan’s eligibility. In some instances, a lender of hard money can even grant the needed funds within 24 hours.
Hard money lenders can be a real estate investor’s best friend. This is why an investor needs to cultivate his relationship with these financiers. Meanwhile, if you want to boost your knowledge of hard money lending.
Posted: Nov 20, 2009