Hard Money Residential Loans Explained

Hard Money Residential Loans Explained

Hard Money Residential Loans Explained

According to various real estate experts and market analysts, now is the perfect time to own a home or to invest in residential properties. With mortgage rates reaching an all-time low and home prices continuing to decline, the current real estate market provides consumers with a great opportunity to secure a place that they call their own.

Despite the "inviting" market conditions, however, many consumers, prospective home buyers, and investors are still finding it difficult to buy residential real estate. One major reason is their lack of personal funds. Another is their failure to qualify for traditional loans due to certain reasons.

Fortunately, there are lenders who are willing to help retail buyers and real estate investors secure financing to buy a home. By providing consumers with hard money residential loans, these lenders are giving them the chance to accomplish their goal.

Unlike banks, mortgage companies, and other conventional lending institutions, hard money lenders are willing to provide financing to borrowers with low credit scores or unverifiable sources of income. In addition, they are also willing to let others use their money to buy and renovate distressed properties, which is something that most traditional lenders won't do. As long as the borrower is spending the funds on a property with great after repair value (ARV), a hard money lender will allow the former to qualify for a loan even if he or she has a poor credit rating.

How hard money residential loans work

A typical hard money loan has a loan-to-value ratio of at least 65%. This means that you'll get 65% of the appraised ARV of the property that you want to purchase using hard money. To give you a clearer picture, here's an example.

Let's say you're planning to buy a house worth $40,000. The appraiser tells you that the property is worth a hundred grand once all the necessary repairs and renovations have been carried out. If the property has an ARV of $100,000, then the hard money lender will give you $65,000. So subtracting the property's purchase cost of $40,000 from the $65,000, you'll have $25,000 remaining, which you can use to improve the overall look of the property.

To qualify for hard money residential loans, meanwhile, you have to ensure that you're borrowing hard money for a property that has a high ARV. The higher the ARV of the property you want to buy, the bigger your chance of getting the approval of a hard money lender.

For more information on borrowing hard money loans, visit www.RehabHardMoney.com.

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