Why Use Do Hard Money for Your 100% Hard Money Financing

Why Use Do Hard Money for Your 100% Hard Money Financing

Hard money financing is a short-term loan secured by real estate rather than the borrower’s creditworthiness or their ability to make monthly payments over a long period of paydayloansillinois.org time. Hard money loans are offered by hard money lenders or a private lender.

The most common use of hard money financing is for fix and flip investors. A real estate investor brings a deal with profit potential (meaning a property that can be fixed up and resold for a profit) to a lender. Rather than looking at the borrower’s debt-to-income ratio, they’ll investigate whether there’s enough profit potential in this deal to pay off the loan after the 5-12 month loan term is up.

Many hard money lenders look at credit score, but it plays a less important role than in a conventional mortgage. Many lenders also require prior successful flips as well as larger down payments than with a conventional mortgage.

In order to justify the risk of a short-term loan, hard money lenders also charge higher interest rates than traditional banks-often 10% or higher. However, the interest costs aren’t exorbitant because loan terms are so short.

What Does 100% Financing Mean?

  • Purchase Price
  • Repair Costs
  • Loan/Closing Costs

For most hard money lenders, 100% financing means they lend up to 100% of just the purchase price of the property. They’ll lend perhaps 90% of the repair costs, and then the borrower also brings the loan/closing costs to the table as well.More