Mortgage & Commercial Lending News.

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Hard Money Loans; what are they?

Posted by Jim Emerson

Jul 18, 2014 9:59:49 AM


Hard money loans are usually short-term loans for individuals or corporate entities seeking to purchase or refinance real estate; be it commercial or residential. Most hard money lenders lend private money (either their own or investor’s) and this allows them to be more flexible than banks or other conventional lenders. Most borrowers who

use this type of loan do so as a short term tool to secure a property or make some improvements to property already owned. Since most of these lenders control their own funds and underwriting process, they have the ability to move much faster than a bank in approving and funding a loan request. Often times a borrower will use this type of financing to purchase and/or rehab a property and then refinance with a lower rate loan through a conventional lender. Most hard money lenders lend at higher interest rates (usually 12% to 18%).

Hard Money Underwriting


A hard money loan is primarily collateralized by a property’s value. Some lenders will also verify the borrower’s (or property’s) ability to service the debt while others will lend strictly on the value of the collateral. Most will require being in first lien position.

If you are interested in a hard money loan, then you should familiarize yourself with the common terms used by most lenders. A typical lender will lend no more than 65% of the value of a property on a refinance or 70% of your purchase price and  often offer short term loans, starting on 6 months and up to 2-3 years. Often times these lenders will be more willing to make cash-out loans than regular lenders.

These types of loans are a good option for real estate investors who need to secure financing for properties in time sensitive situations, or who may have difficulty qualifying for a loan from conventional financing institutions. They're also an option for those borrowers who have less than stellar credit, since these lenders may be more willing to overlook bad credit if the other variables of the borrower/property are strong enough.

If you would like additional information on these types of loans in the Houston area, please feel free to contact AMI at 713 682 4400

Topics: Hard Money, Hard Money Loans, Residential Loans


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