If traditional financing is not an option for you to secure a loan for purchasing real estate properties, a hard money loan might be the perfect solution. A hard money loan is a short-term loan that is used to acquire investment properties to rehab and then flip for resale or rent. This specific type of asset-based loan financing is used by real estate investors and others who are looking to finance non-owner occupied real estate. This real estate can include residential properties, commercial or industrial buildings, and land.
So how do you get started? You might have tried a google search of, “How to find hard money lenders,” without any luck. In this article, you will learn how to find the best hard money lenders and what to look for when selecting your lender.
Where Do You Get a Hard Money Loan?
First things first: It helps with your search to find hard money lenders for real estate to know where hard money loans come from. Hard money loans come from private lenders and individual investors. Banks and credit unions do not offer hard money loans. The lending criteria will vary depending on lender preferences and the experience level of the borrower. This could affect the term of the loan, Loan To Value (LTV), and interest rate.
Who Should Get a Hard Money Loan?
Hard money loans are ideal for real estate investors looking to rehab and flip residential, purchase commercial or industrial buildings, or even land. Real estate investors who intend to sell or refinance the property after a limited period of time are ideal candidates since hard money loans are intended for the short-term.
How To Find Hard Money Lenders for Real Estate
You can find hard money lenders by:
Using Google: A quick online search for finding hard money lenders could be helpful. However, you will also want to do some fact-checking to make sure the lender has positive reviews.
Asking a Real Estate Agent: Consider asking a local real estate agent if they recommend any hard money lenders in your area.
Checking Social Media: Social media can be a very useful tool when it comes to finding hard money lenders. You can read the comments on their posts to get an idea of how satisfied their clients are with their work. Consider searching for lenders on Instagram, LinkedIn, Facebook, and Twitter, using hashtags related to the industry. Some examples are: #FixAndFlip, #RehabMoney, #HardMoneyBroker, and #HardMoneyLender. You could also try hashtags specific to your area, such as: #NJRealEstate and #NYRealEstate
Attending Meetings: By attending local real estate club meetings you might receive referrals to specific lenders that have already been vetted by members of the club.
Questions To Ask Your Hard Money Lender
Once you have found a hard money lender, there are a few questions that can be helpful to ask to determine which lender is best for you. These questions can include:
- Are you a lender or a broker?
- Will you check my personal credit?
- Do I need a specific credit score to secure a loan with you?
- Do you offer loan extensions?
- How long does it take to get approval for a hard money loan?
- Where does the loan money come from? What are your interest rates?
- How often are payments due?
A reputable and experienced hard money lender should easily be able to provide you with all of this information in a straightforward manner.
How Do Hard Money Loans Work?
Hard money loans work very differently from a traditional lender. For example, traditional mortgage lenders always require proof that you can repay the loan over time, and that proof is almost always in the form of a credit score and your current income. Sometimes even borrowers with a high credit score still do not get approved through a traditional lender if their income does not meet the specific requirements. Additionally, working through a traditional lender is a slow process with significant amounts of paperwork that can sometimes take several weeks or months to be notified if you are approved or denied for the loan.
Hard money loans do not require a high credit score or income. While it might be preferred that the borrower has a 600+ FICO score, projects can oftentimes still be funded even when a score is below that range. Hard money lenders lend on the asset (the property or land), so if for some reason the loan cannot be repaid, the lender has recourse to the property.
How Do Hard Money Lenders Get Paid?
Hard money loans are short-term loans that can range from 6 months up to three years but most loans are for one year, and are setup as interest-only payment loans. (Amortization options are sometimes available). At the end of the loan, you make a lump sum payment to repay the borrowed amount.
Do Hard Money Loans Show Up On Credit?
It is unlikely for hard money loans to show up on a credit report. However, it will most likely appear on your Asset Search and Background Check.
The Best Hard Money Lenders Will:
When selecting your hard money lender, keep in mind there are several key benefits they should offer. The below are a list of features to search for in your hard money lender:
A Good Reputation
Your hard money lender should have experience with this specific type of lending and positive reviews from past clients. Our team at West Forest Capital has years of experience with hard money lending and working with real estate investors to secure capital for their property purchases and rehabs.
Having A Quick Transaction Speed
At West Forest Capital, we prioritize transaction speed. The application process for a hard money loan does not take nearly as much time as with a traditional lender and in most cases, we can fund a loan within five days.
Flexibility
As a private lender, we are able to address each loan application on a case-by-case basis, something traditional lenders cannot do. Whether you are looking for the best rate, the fewest points, or the lowest out-of-pocket requirements, we will work with your needs. Our deep knowledge of the local market also allows for creative solutions. And because we know the ins and outs of the local counties and towns, we will help you to achieve success with your investment.
Upfront Loan Rates and Terms
Your hard money lender should be upfront about their loan rates and terms.
Our loan rates are as follows:
- 9.5% – 11% interest only
- Amortization option available
- 1 to 2 points origination
Our loan terms are as follows:
- First lien preferred (second can be considered)
- 1 year term
- 2 year term available
- Up to 85% of purchase price
- Up to 100% of rehab
- Total Loan amount not to exceed 70% ARV
- Appraisal must be ordered by West Forest Capital
Willing To Work With You
Your hard money lender should work with you to help you achieve your property goals. Even if you have a low credit score or a foreclosure in your history, our team at West Forest Capital might still be able to work with you on securing your hard money loan.
Provides Transparency
When it comes to a loan, you never want to have any last-minute surprises. Our funding process is clear and simple, and we never charge hidden costs or fees.
Communicates
Communication is key when it comes to lending. Our team at West Forest Capital is diligent, quick to respond, and available any day of the week to answer any questions you might have and to assist with your needs.
Hard Money Loans with West Forest Capital
West Forest Capital provides funds to real estate investors and others looking to finance non-owner occupied real estate. We fund property types which include:
- Apartments
- Single-family
- Multi-family
- Commercial
- Industrial Land
We provide rehab funds, or full construction costs, as needed. We also provide fast closings, almost always less than 10 days, and often as quick as 3 to 5 days. We’ve even previously closed a brand new loan in one day! We lend in New Jersey, New York, Connecticut, Massachusetts, Pennsylvania, and Florida.
