Hard money loans can be a great way to finance a specific type of real estate asset which gives loan applicants the secured loan for their real estate investment. Hard money lenders are usually private money lenders or private companies. The interest rates for hard money loans are higher than typical commercial or residential property loans because of the increased risk on the part of the hard money lenders. Many probable borrowers are not ready for the loan application. Here are some guides to help you prepare for applying a hard money loan.
- Look for the perfect venture.
The property in question needs to be collateralized when applying for a hard money loan so looking for the perfect one is very crucial. Hard money lenders will make sure to check that the asset is a safe investment for them.
- Have a payment strategy.
Hard money lenders wants to assess if the borrower plans to either refinance or sell their property before the term is over because hard money loans have shorter term usually last 1-2 years. Having a plan on how to repay the loan is a very important factor for the private money lenders.
- Prepare the right documents.
Knowing who the borrower is very important for the private money lenders in approving for hard money loans in securing the property of the borrower. The borrower may be asked personal information including about existing debts, income and other assets. So, be ready for this.
- Do some research.
The borrower must know the specific area that they want to invest in and have pictures ready of other similar properties. Knowing the recent sales of comparable assets is also crucial.
- Consult a contractor.
In applying for hard money loans, if the borrower brings an estimate from their contractor presenting what costs are involved and the repairs needed for the property, they are more likely to be approved for the loan.
- Show some value to the lenders.
The assurance that the hard money lenders want to know is that they want to make sure that the borrowers are not having problems financially. Private money lenders will look for a great credit score, cash on hand, other cross collateral and an experience in real estate investment. Not all of them are needed but showing some of these might get you approved for the loan.
Hard money lenders or private money lenders want to know and see that you are interested in this type of loan. Get the information that they need and return calls swiftly to those private money lenders in a timely manner. If there’s a delay in returning back to the hard money lenders, they might consider lending their assets to another potential borrower.
Relationship with the investors, lenders or contractors is everything. The factor to success in real estate investment is to get and maintain long-term business relationship with the other people in the industry that you are doing business. If you are known by your integrity and have a strong connection with successful people in your circle, your hard money lender will be asking you to have business with them.