Hard money loans are an excellent choice for purchasing a property that you intend to flip or use as a rental. They can be easier to obtain than other loans, especially for borrowers that don’t have a high credit score or are looking for faster funding than traditional loans provide. If you’re purchasing real estate investment property, you’ll benefit from a hard money loan because they are faster to obtain and can help you close the deal more quickly. Here’s how that’s possible.
Flexible Loan Structuring
One reason hard money loans are great for real estate financing in Texas is that the structure of the loan is more flexible than other types of loans. Private lenders that provide hard money loans are more interested in providing financing than traditional lenders that seem to look for any way to keep borrowers from obtaining financing. That means that the private lender is less interested in credit scores or using a traditional loan structure. This makes it easier for borrowers to pay back the loan in a way that’s individualized to the project instead of making the project fit into the timeline of a loan. Since the lenders are more accustomed to making these accommodations, you can get financing more quickly than when trying to get these accommodations built into a traditional loan, which may end up being impossible anyway.
Fast Underwriting Process
Hard money loans have a faster underwriting process, which means you can get the property purchased more quickly so that you can get to work rehabilitating the property for another sell or for renting or leasing. If you’re able to provide the documentation to the lender quickly, you’ll be able to close the loan quickly as well. As long as you have all the information ready for the lender when you make a loan request, you’ll be able to receive a response very quickly. In fact, many private lenders are able to respond to hard money loan requests in one day, and the loan itself can close in just a few weeks. This makes your offer on a property look far more attractive to a seller when you can finish the financing quickly.
Another reason hard money loans can speed up a deal is that the terms of the loan are made clear during the application process. You’ll avoid surprises that often crop up in the midst of a traditional loan because you’ll know what’s expected before the application is even submitted. You’ll know exactly what will happen to the collateral you offer if you default on the loan so that there aren’t any surprises at closing.
Another reason a hard money loan can help you get a deal closed more quickly is that there’s no middleman to work through. Private lenders typically work more closely with the borrower instead of with a broker so that communication is more frequent and succinct. This helps avoid misunderstandings and allows the borrower to work directly with the decision-maker rather than with a group of people, which is almost always the case with a traditional lender.
When you’re considering a hard money loan for commercial real estate loans, you’ll probably notice a higher interest rate. It’s important to note that the reason for this is to help investors make a better profit. These are short-term loans to provide funding for an investment opportunity, and in most cases obtaining the loan quickly results in a higher return. To learn more, contact Investor Loan Source today.