Top 5 Reasons to Use a Hard Money Lender

In today’s adverse economic times and with the housing bubble bursting into a colorful confetti of government regulated size pieces, many traditional lenders are unable to offer loans, even to borrowers in good standing.

If borrowers that have acceptable credit ratings are not able to finance a property, how can real estate investors with marginal credit ever manage to regain their footing in this volatile market? It just so happens that an excellent alternative to traditional financing is the up-and-coming hard money lender.

While hard money lending is nothing new, when the housing market was heating up to steady simmer, banks were able to underwrite a significant number of loans, making the hard money financial sector something that was only considered in the advent that a loan was unexpectedly turned down by underwriters.

Today, underwriters must abide by stringent government regulations, leaving borrowers with a mere day’s notice before closing that the property will not qualify for a loan. What is a borrower to do in circumstances such as these, when time, money, inspections and due diligence monies have been spent to research an investment? Turning to a hard money lender is often the only option available.

What are the top five reasons to use a hard money lender? They include:

1. Documentation of Income – If a borrower wrote off losses from investments several years ago on tax returns, then chances are the taxable income was significantly less, meaning the qualifying income amounts are not acceptable to many banks. Today, many people that are self-employed, including real estate agents, mortgage brokers, inventors, consultant, freelancers and even private physicians, are finding their income amounts are not acceptable to standard banking institutions.
2. Property Condition – The worse shape a property is in, the better deal a real estate investor can score, but ultimately the higher chances a traditional bank will reject the loan based on property condition. A traditional lender will not lend on a home that is not deemed in livable condition. In order for a real estate investor to make a significant profit on a house, he/she may need to look at alternative funding sources, such as hard money lending.
3. Timing – One of the most popular reasons people work with hard money lenders is that real estate deals can close fast. Instead of waiting the traditional 45 to 60 days with a lender, deals can close within days.
4. Business Ease – Instead of looking for ways to kill deals, an approach many underwriters take these days, hard money lenders look for creative ways to put deals together, ultimately helping the real estate market’s comeback.

Less Out-of-Pocket – While traditional lenders require larger down payments and do not offer financing for repairs, hard money lenders will look at an investment’s return and offer cash to help supplement repairs to get a property in saleable condition.