Many homeowners and investors in America are struggling with their credit.
Credit cards and loans are not easy to get anymore, but people still need them.
So how can we qualify to loans and purchase a home?
We’re all fighting to find a solution, but things are getting worse and there is nothing that most of us can do about it. The values of homes are low and we want to invest every dollar we have, but banks don’t want to loan money unless you provide them with documentation that you can’t get.
The new trend today to purchase a residential or commercial real estate is hard money. Hard money is a group of private investors that are acting as a bank. These investors know that you can’t show the perfect income or credit, but they will still help you to purchase real estate. How do they do that?
Private investors are individuals just like you and me, but they have money they’re willing to loan for a good investment. What is a good investment?
A good investment is equity, the more equity you will have the more desirable your investment is to the investors. This is why credit score and income is not that important.
Private investors recognize the problems in the economy today, so they take advantage of it. They will loan you only if you have equity of at least 65% loan to value. If you’re planning to purchase real estate, the private investors will ask you to put minimum a down payment of 35%.
What’s the terms and conditions for these type of loans?
Hard money lenders normally loans are amortized over to 2 years. In some scenarios investors will extent the amortization period and increase the points charged for the loan, but your main goal is to refinance this loan as soon as you can because of the high interest rate.
Every hard money lender work different. Some will loan you money for construction and some will not loan you for construction. You need to do some research online before committing to any investor out there. Many private investors will not offer you great interest rates or amortization period, so you need to know the company you’re working with before committing.
Question you need to ask:
- What is the interest rate?
- What is the points you’re being charged for this loan?
- What is the amortization period?
- What type of properties they will lend on?
- There is any due diligence fees? (you do not want to pay due diligence fees.)
Yanni Raz |
