What You Need To Know About A Hard Money Loan
With the way the economy is today, it can be very problematic to get an institutional or bank loan for residential investment or commercial properties. Banks look at lots of factors when determining whether or not to lend money and loan brokers can take forever to find and establish a loan. Between the reticence of banks to loan funds and the length of time it can take for a loan broker, a residential or commercial hard money loan can be your very best option to take.
You do have options to choose from to fit your needs and many can come from these 9 different types of hard money loans.
1. Hard money aquisition loans are typically used to purchase specific property like platted land or improved property. If you can’t get the funds in time to complete the deal from the bank, if there is a problem with liquidity or credit or the institutional lender’s don’t think the property is up to their standards, these types of loans are perfect.
2. You can use value added loans to increase your cash flow by renovating a property that has higher than normal vacancy rates. This is a great loan when a property has a lot more potential income that it’s currently generating.
3. Hard money land acquisition loans are a way to buy land to improve. Banks and other lenders, including other private lenders, aren’t financing many land deals at all so finding a hard money loan for property is going to be your best bet.
4. To go from point A to point B in a finacial circumstance, a great way to bridge the gap is a bridge loan. You can use these short term loans while you are waiting for financing through a bank to purchase a property. Instead of risking the chance of loosing a property by having to wait months for a bank loan, these loans can be closed on in a few weeks.
5. To help with a finished property that hasn’t been sold, contractors can get help through constuction pay off loans. This loan is used to pay off the existing construction loan so the developer avoids losses and doesn’t have to short sell the property.
6. To keep property from going into foreclosure, many can get foreclosure prevention loans. Because of the damage this can do to a borrower’s credit, a hard money loan can be the key to them keeping the property and keeping their credit good.
7. DIP or debtor in possession loans are designed to help exit a bankruptcy. For those who have had to file Chapter 11, this type of hard money loan enables them to get real estate out of bankruptcy court so it can be sold.
8. Foreign National hard money loans are for those who are from other countries and have a desire to purchase American real estate but can’t secure a loan from a bank. A traditional source usually won’t fund a loan for them; however, a private lender more than likely will.
9. Takeout loans or standby commitments are for contractors who want to secure funding from a bank for property development. Having a commitment of a hard money loan may be required before many banks will give a construction loan once the property is complete.
Both borrower’s and contractors can use these options as leverage in their favor. While traditional lenders may not be able to work with you on a standard loan, a hard money loan is much easier to get and a lot quicker to get as well. If you’re in need of a loan for a real estate deal, take a look at a hard money loan and the hard money loan rates. Everything could come together with these loans.