Some requirements for hard money loan

A hard money loan is a type mortgage used in residential and commercial lending. The lender will supply the money but with strict requirements. These types of loans are for borrowers with plenty of cash, but perhaps a low credit score. Credit is not important in these mortgages because the lender is using collateral against the loan. The collateral is usually the residence you are purchasing. A hard money loan comes with a very high interest rate, but for some borrowers it may be an option for obtaining a mortgage.

A hard money loan is only for the 1st position, meaning it can't be used as a 2^nd mortgage. They will not lend to a borrower who needs a second mortgage for lack of equity. In case of default, they want to be the first in line to recoup any proceeds.

Loan to value is a term used to describe how much the loan will be in comparison to the value of the home. If you are purchasing a home at $100,000 and need a mortgage of $70,000, then the loan to value would be seventy percent. In hard money situations, the loan to value is usually 60% to 70% percent.

A hard money lender will not lend more than 65% to 75% of the property value. So you must purchase something with instant equity, such as a bank owned property, or more commonly, you must have the cash to put down. You would be required to put 30% to 40% of the loan down at closing in cash. This type of loan is really only meant for those with access to cash.

If you are purchasing a home and do not have the 30% to 40% down, the hard money lender may perform a cross lien. This is where they put a lien on another property you own that has some equity in it. This lien serves as collateral for the new hard money loan you are trying to obtain.

A hard money loan is an option if you have bad credit since there are no credit requirements. It also may be an option for those who are self employed and don't want to show their document of income. Also they may use a hard money loan for a new construction project. In these cases, it is easier to obtain funding than trying to obtain a traditional mortgage, especially if they have several other investment properties simultaneously. For investors, these loans carry high interest rates, but they don't carry the mortgage long before selling the property.

Before taking hard money loan, you should choose verified hard money lenders. Otherwise you will be suffering from them. From “Lending Universe Inc”, you will find more than 10000 hard money lenders and a huge collection of loan brokers also. All of them are registered. They are always ready to give you a hard money loan and broke the loan.

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