Hard Money Lenders – Where Can You Find Them?
If you’re looking for hard money lenders, who are you really looking for? Do you know what you’ll get with a hard money lender?
Who Is A Hard Money Lender?
Hard Money Lenders
If you want hard money then you’re looking for a specific type of lender. This person must be someone who is willing to give you a loan no matter what. In other words you want someone who will loan you money even if you have bad credit, just gone through bankruptcy, or had some other financial catastrophe.
In essence that is what a hard money lender does; loan money to people who otherwise couldn’t qualify for any other type of loan. If you can qualify for another type of loan you’d be better off getting that type of loan.
So good hard money lenders are hard to come by, even though there are many ads for them all over the place.
Hard Money Lenders – Definition
Let’s start with a definition of a hard money lender so that you know exactly what type of person you want.
A hard money lender is a person who is willing to make a loan based upon the value of some asset used as collateral. In addition, hard money lenders are one type of private money lender.
Hard money lenders are usually and most often associated with real estate. The big reason for this is that real estate is a perfect asset to use as collateral. It can’t be taken away because it doesn’t move. Some hard money lenders will make loans with other types of assets used as collateral, such as cars, boats, airplanes, etc. But these types of loans are even harder to get because the asset backing the loan can easily be taken away or destroyed. Of course, if that happens the value of the collateral disappears.
You can think of a hard money lender as a pawn broker of sorts, who lets you keep your asset while paying off your loan.
Hard Money Lender Rates
Since a hard money lender is loaning money based upon some asset, the value of the asset helps to determine the interest rate. Because hard money lenders are most often associated with real estate we’ll concentrate on these types of lenders.
First of all a hard money lender will consider the value of the real estate. That means that a current appraisal would be necessary to substantial the value. Then the hard money lender will take into consideration your ability to make payments or pay off the loan. Although your current credit condition may not be good, the hard money lender may still want a credit report. The reason is that even though the hard money loan is based upon the real estate asset value, the lender doesn’t really want to go through the trouble of taking the real estate if you fail to make the payments.
So, the rate of a hard money loan will vary widely depending upon how risky the lender feels you are, and how long you want the loan. Interest rates of 25% to 30% are not unheard of. But for short term loans, say 3 to 5 years, you could expect to have rates of 12% to 15%. This also varies with the current economic conditions.
Loan To Value (LTV) Ratios For Hard Money Loans
How large a loan can you expect to get from a hard money lender? The same factors which govern the interest rate also govern the amount of money you can get from a hard money lender for a specific piece of real estate.
Back in the real estate boom time, hard money lenders would be willing to go to 70% LTV for loans. There were even a few who would be willing to go higher. But today is a different story. It’s hard to get a hard money loan for more than 60% LTV these days.
One other thing you should be aware of is that many hard money lenders will want to use their own appraiser to determine the value of your real estate. The reason is that they will most likely come in with a low value for the current fair market value (FMV). So the loan amount would be less than you might have expected.
Where To Find Hard Money Lenders
Considering all these factors, where do you find a good hard money lender? It can be a hard job. Hard money lenders aren’t necessarily the ordinary person with a lot of money. Why is that? Basically, hard money lenders have to do a lot of research on your property before they are willing to make a hard money loan. They want to feel really comfortable that they won’t have to take the property to satisfy the loan. And they want to make sure that if they do have to take the real estate, they have plenty of value above their loan to cover any costs of foreclosing and selling the property to get their cash back.
Hard Money Lenders Want A Lot Of Information
As mentioned above, hard money lenders tend to want their own appraisals. Then they want information about you, which may include a credit report. They may also want employment information. This is all to make sure that you could make the payments when they are due. In addition, the hard money lender needs to have loan documents drawn up, which is almost as much work as a real estate closing. That‘s because the lender needs a mortgage or deed of trust for your property which needs to be recorded to protect the lender’s interest.
Places To Look For Hard Money Loans
Check out these locations and sources for hard money lenders:
- Title Companies – you may be able to get someone at a title company to get you the name of a lender that they do business with who does hard money loans.
- Craigslist – Many hard money lenders advertise on Craigslist. See whether there are some in your area.
- Mortgage Brokers – Many mortgage brokers deal with hard money lenders to make real estate deals when their clients can’t qualify for a bank loan.
- Penny Saver Papers – Many of the free papers found at shopping centers in or near grocery stores have hard money lender advertisements
- Real Estate Listing Papers – The real estate listings papers also found in shopping centers have ads for hard money lenders
- Advertising on this web site – These are hard money lenders looking for your business
Hard money lending is like any other type of business. Hard money lenders are in business to make loans, and they need your business to make loans and earn interest on the loans they make.
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