Hard Money Lenders Rhode Island

Hard money lenders are non-bank, asset-based lenders. While both banks and hard money lenders make mortgage loans, the requirements and lending criteria often vary significantly from traditional banks. Hard money lenders focus more on the underlying property rather than the borrower. The underwriting process is considerably shorter with a hard money lender, and a loan can often be funded within a week (as opposed to 2 to 3 months or longer with a traditional bank).

Real estate investors, especially those buying foreclosures at auctions, often use private money loans from a hard money lender to fund the purchase because the terms of the auction require an expedited closing process. Hard money lenders also fund properties that traditional banks won’t finance, such as those without a Certificate of Occupancy (CO). Additionally, a hard money lender is a great option for someone with poor credit or rebuilding their credit, as a low FICO score won’t prevent you from securing a loan. These lenders also provide loans to refinance existing lenders or as a way to cash out on a property.

1. Funds for the purchase, typically cover 70 to 85% of the purchase price.
2. Funds for rehab, if necessary, which may cover up to 100% of the renovation costs.

Because a hard money loan is considered a commercial loan, a hard money lender will not lend to individuals, and will only lend to LLCs. But don’t worry if you don’t have an LLC, they are very easy to create and can have only one member (you).

Hard money lenders analyze both the purchase price as well as ARV to make sure they can get paid back on loans they make. A property that is bought below or at market is an important aspect of obtaining a loan. If the borrower is also taking out a loan for rehab purposes, a hard money lender will want to make sure that the repairs are being done according to the repair schedule and on time. A clean title is also essential when obtaining a hard money loan. Any judgments or liens on the property or LLC that is taking out the loan (remember, the loan must be made to an LLC), will have to be cleared before the loan being disbursed.

It’s important to a hard money lender that their borrower is entering into an investment project that will be profitable for the borrower. In other words, the hard money lender wants you to make money on your real estate investment so that they can get paid back on their loan. The lender will ensure that there is enough “spread” in the deal, which means that the ARV will cover the purchase price, rehab costs, interest on the loan, closing costs, and any other associated fees with sufficient room left over to make the investment profitable for their client.

A hard money loan is most often used in the following scenarios:

• To purchase and repair a property that a traditional bank will not lend on (either because of the property itself or because of the borrower’s credit), which will then be sold to a retail buyer. This is commonly called “fix and flip.”
• To purchase and repair a property that a bank will not lend on, which will then be rented out. Once rented, the property will be considered “stabilized,” and may be refinanced with a traditional bank at a lower rate.
• To fund real estate purchases that need to be done in a timeframe that a traditional bank cannot meet (for example, a foreclosure auction). While a hard money lender can often fund the purchase within a week, a bank may take 2 or 3 months or longer.
• To obtain a fast cash-out refinancing using an already-owned property as collateral.
• To quickly refinance another mortgage on the property that is coming due.
• To buy out a partner or family member. Hard Money loans are a great option to buyout a business partner and then refinance into longer term debt upon gaining full ownership of the property.