When it comes to hard money loans, diving into the process entails understanding first what this type of loan is all about. A few things that you should know about this type of loan is that it comes at a high price and is difficult to come by. If you can afford to take out this loan, then you should know that it will be your last resort.
The best way to understand hard money loans better is to compare them with conventional loans. One of the things that you need to know about conventional loans is that most people get them when they plan to buy a house. Lending companies let buyers borrow money by looking at their income and credit history. Getting a hard money loan, on the other hand, will not require looking into the credit score of the potential borrower. These loans focus more on the assets of the borrower. It is important to bear in mind that one loan is not a substitute for the other. There are several loan options that you will be having when you have plans of purchasing a house. Your options should not include choosing between hard money and conventional loans. Taking out a hard money loan is often intended for distressing situations.
Hard money is often provided by private lenders. One noteworthy fact about private lenders making them different from your usual lenders is that they take their time assessing the current situation you are in as a borrower. Private lenders are aware of the fact that a couple of missed payments due to employment loss on the part of the borrower does not automatically mean that they cannot repay their loans. This is the part where hard money always comes in. If a homeowner has fallen behind his mortgage that he cannot catch it up even if he has work and resumed his payments, this part is where private lenders come in. These lenders will be offering hard money to pay off the mortgage amount. In short, these loans are offered to borrowers who want to start afresh and keep their credit standing good. As the months progress, you can slowly improve your credit report by repairing the damages of missing out on your house payments. You can then proceed to refinance using traditional loans.
Getting refinancing as quickly as you can is vital if you’ve taken a hard money loan because if you don’t you will end up paying stiff terms. If you are getting a hard money loan, the interest rates vary between 10% and 18%. In short, these loans can take a lot of expense on your part that is why you have to think things through and only make it your last resort. Nonetheless, this kind of loan is a valuable one as you as you use it at the right time and choose a good private lender.