Common Myths Regarding Hard Money

There are many misconceptions regarding hard money lenders in the real estate industry today, and yet for those in the know, it continuously proves to be a real estate investor’s biggest asset. Do not be put off by the stigma surrounding the word “hard money” or by stories you’ve heard about a friend of a friend before learning more. Here are the top arguments I hear from naysayers on a continual basis and the reasons why they are simply not true!

Myth #1: Hard money is only for the desperate real estate investor.

This is the biggest myth of all. Many hard money lenders are privately funded, meaning they do not require bank financing to close a loan. Therefore, many hard money lenders can be more flexible than the bank when underwriting a loan if the deal makes sense. Hard money is great for those who are self-employed as they do not need to prove their income with a W-2, as well as immigrants, those with less than perfect credit scores, investors who work with properties that appear to be less than desirable, those investors who have reached their loan limit with their institution, and those investors who just need to close the deal fast. Hard money is for everyone!

Myth #2: Hard money loans are expensive.

While hard money loans tend to give most people “sticker shock” it is important to remember to look at the big picture. Most hard money lenders can lend a higher percentage of your project’s cost than some stringent traditional lenders, allowing you to bring less out of pocket funds to the closing table.

Hard money loans tend to have shorter repayment periods and prepayment penalty times. This means you can pay the loan off faster with less interest in total. Investor Loan Source, a national private lender, even has a one-time close feature allowing you to convert your short-term rehab project to a long-term rental without going back to the closing table. This allows you to avoid paying closing fees a second time.

In addition, because of the fast-closing times of most hard money lenders (who can often close within 10 business days or sooner) your potential for profit rises. After all – time is money. In an environment as hot as the current real estate market, the wait for a traditional bank loan can cost you opportunities.

When combining these perks your hard money loan tends to be a less expensive choice overall.

Myth #3: Hard money loans are risky.

This myth is almost laughable. Most of the time hard money lenders are lending out their own money and making a risky loan is not in anyone’s best interest. Hard money lenders often have a vast understanding of the real estate market and what is entailed for a project to be successful. It is not uncommon for lenders to be successful businesspeople who have the entrepreneurial spirit and a reputable background in real estate, investment banking, accounting, law, etc. If you choose an experienced hard money lender, this will ensure that proper due diligence and calculations are done to help determine whether an investment will be profitable for you, the borrower. They want you to be successful so that you will use them for your next real estate investment project.

Myth #4: Hard money lenders want to take your property.

Stop right there! Hard money lenders are in the lending business NOT the foreclosure business. They do not want to own your property. When a foreclosure is pursued, you can be sure it is because every other avenue was exhausted. Regardless of whether you go the traditional lending route or hard money, be sure that you understand your loan terms, have a solid exit plan in place and care apable of repaying your debt.

Truth: Hard money lenders are important resource.

Do not pass up the opportunity and benefits that come with taking out a hard money loan for your next real estate investment deal. It may make sense to use hard money based on your needs and the investment opportunity. Finding a lender you can trust is the single most important choice you can make. Looking for a hard money lender? Consider Investor Loan Source. Visit www.ils.cash to learn more.

What Investors Should Know About Title Commitments

What is a Title Commitment and Why Do Investors Need One?

The title commitment for insurance is the insurers promise to issue title insurance after closing and should be carefully reviewed and understood. It is essentially a disclosure document that outlines any issues/requirements that need to be addressed prior to closing as well as any liens, obligations, and defects affecting a property. This is a snapshot in time looking backwards. Your title commitment will not ensure any title issues that arise after this date (ex. liens put on the property after the commitment is issued, etc.) and expires six months from the effective date seen on Schedule A of the commitment. After closing, your title company will issue your official Title Insurance Policy using the commitment previously provided. This document is important as it protects you should any disputes arise regarding ownership and provides coverage against losses due to title defects.

Loan Policy and Owner’s Policy

There are two types of title policy’s: the loan policy and owner’s policy. The loan policy is usually a requirement of any lender and will protect their interest in the property they are loaning money on. This policy is usually written at the loan amount. It does NOT insure the owner should any title issues arise. A separate owner’s policy can be purchased that will insure you for the full amount of the property purchase price (not just the loan amount) and will remain in place as long as you have an interest in the property.

Title Commitment Sections

Each title commitment is made up of three parts: Schedule A which covers the basics of the transaction, Schedule B Section I which lists all requirements that must be addressed prior to closing, and Schedule B Section II which addresses exceptions to coverage.

How to Read a Title Commitment

Schedule A

This part of the Title Commitment covers the basics of your transaction. It is imperative that all information here is correct. You will want to check your effective date, the name of the person who currently holds title (verify that this is your seller), the legal description (title companies do not insure addresses only legal descriptions and it must be correct), the proposed buyer and sales price (coverage amount for the owners policy), and the name of the lender and loan amount (coverage amount for the loan policy). You will also want to check that the commitment is countersigned by the insurance company.

Schedule B Section I – Requirements

This section outlines requirements to be addressed prior to closing in order to obtain coverage. You can expect to find information regarding paying off the sellers existing mortgage/lien, obtaining release of liens on the title, recording new loan documents, Taxes and HOA dues past due and current, and correcting errors in title. Fulfilling these requirements are sometimes as simple as providing documentation to the title company.

Schedule B Section II – Exceptions

This section lists things that will not be covered under your policy such as HOA restrictions, mineral and water rights, utility and access easements, encroachments, plat restrictions, liens not found in public record, etc. Most things you will find here are pretty standard however, you must review this section carefully as it may impact the way you use your property and ownership.

Investing in real estate is an important decision. When choosing a lender, be sure to select an experienced one that will walk you through the process and answer any questions you may have. Investor Loan Source is happy to assist you along the the way.

Hard Money Loans Made Easy

There are many financing options for real estate investors available today. One of the most popular options has become the hard money loan. A hard money loan is a loan collateralized by a hard asset (in most cases this would be real estate). One of the biggest differences between a hard money loan and a conventional loan is that hard money lenders use the value of the property versus the borrower’s creditworthiness to determine the loan.

Hard money loans tend to have terms of 12 months, but some can be extended to as long as two to five years. This works in favor of investors who plan to purchase a home in need of repairs, rehab it and sell it quickly for a profit

Advantages of Hard Money Loans

One of the biggest advantages is that there are less restrictions with hard money loans when comparing them to traditional loans. Lenders rely less on a borrower’s credit score and more on the value of the property itself. This allows borrowers with a less then perfect credit score to obtain a loan.

Another key benefit of hard money loans is that they can be acquired quickly. Loans from banks and traditional lenders often take up to 60 days to issue, while hard money loans can often fund in a week. This is especially important if investors hope to acquire properties with competing bids. Time is money in real estate and time is on your side with hard money.

Hard money loans also provide tremendous leverage for fix and flip and buy and hold investors. The investor can enter a project without putting their own money at risk and remaining liquidity. This is a huge reason real estate investors seek out hard money lenders in Florida.

An Easy Decision for Investors

Although many investors with imperfect credit scores find hard money loans easier to qualify for, because of the higher risk involved these loans often come with higher interest rates. Despite this, they are an integral part of the the real estate investing process and can be utilized when a traditional loan doesn’t make sense or is too difficult to get.

Hard money loans aren’t just for flippers. At Investor Loan Source, we offer loans for rental properties, as well as commercial investment projects. Be sure to ask one of our loan specialists about our exclusive wrapable loans, commercial and one-time close fix and rent options. We make hard money easy – the application process is fast and simple. Contact us at 833-457-2274, email us or apply online today.