As adjustable rate mortgages approach their fixed periods, refinancing becomes much more difficult as well as lenient lending becoming history all together. This is due to an upheaval of recent failed mortgage loan payments and increasing numbers of foreclosures in the U.S homeowners. Those classified as sub prime borrowers, have hit road blocks in refinancing.
With that in the mix, many individuals ask what would come of a borrower with little or no documentation, who do they turn to? Mortgage banks are very resilient with borrowers who have reach certain heights of creditworthiness, and hard money lenders are also helping to satisfy their clients who have fallen into these spots.
Altering the contract and agreements in a way to make themselves beneficial for all involved parties, hard money and private lenders charge higher rates of interest compared to loans offered by your more traditional financial institutions and banks. Many times requiring a predetermined amount of equity in a house.
Though known for sometimes ‘sharking loan’ money at high interests, seizing properties, a hard money loan can make the difference in staying in a property or being foreclosed upon. Used properly, borrowers can make changes in their financial world to prevent foreclosures with aid from hard money lenders, it can also be said that these are important resources for sub prime borrowers as well.
Things to Keep in Mind for Hard Money Loans:
- Make sure you contact and consult many different lenders, explaining your situation as to discuss the terms of the loan offered so you make the right choice.
- These loans are meant to be beneficial to both parties, so be ready to negotiate with the creditors, every fee should be understood before anything is signed.
- Do not get greedy, nor reckless. Take only a loan amount for what you absolutely need, a larger loan will raise your debt and cause you to spend more money than you have to.
- Always consult your accountant and/or real estate attorney, they share cordial relations with lenders and can help guide you to reliable companies, which can save you from more difficult situations in the future.
- Be honest with the loan officer, share any and all information relevant to your fiscal situation and details of what has brought you to the hardship leading to requiring a loan. This is a profitable business, lenders always look to alleviate risks.
With these facts in mind, hard money lending is very popular as a useful solution to those who are facing foreclosures. These loans are not to be taken lightly, and with a bit of productivity and honesty, you can guide yourself through the hardships into financial stability.
Important Factors for Hard Money Lenders
Never dealing down, funding in what is foreseeable as a profit margin, as well as working along side real estate investors to make sure there are good purchases in the properties. A Hard Money Lender with always look for the good properties, while avoiding their ideas of bad properties, this is done to ensure profit for all parties involved. If a deal does not look favorable, a Hard Lender can turn it away.
Essential Elements as Told By Hard Money Lenders:
- Find out the rehab sale price for the property
- Repair evaluation and calculating dollar cost required to rehab property.
- Know your buying a holing cost, as well as your time periods from the point you pay your loan and interest.
- Calculate your costs to sell the property; Marketing, Real Estate Agents, Title Fees.
- Research the depreciating annual basis market, this factors into the mix creating a flush fund for you when something unexpected arises.
- Most Importantly, Profit must be as big as you can possibly obtain. That is why we are doing this after all.
Look at all foreseeable factors when flipping a property to determine the practicality of the purchase. Evaluate not only the intended property, but immediate area with same square footage as well. If the bank owned or short sales property is in terrible condition exclude these, however, if it is in favorable condition with same square footage you can use this as a comparison. This will give you a proper prediction of what you will be able to sell for.
