Hard money refers to loans from investors that are linked to a higher interest rate than a conventional loan. They depend more on the collateral offered by the applicant rather than a credit rating. Hard money loans are useful for commercial property owners with less than perfect credit, but owning a property with sufficient equity to cover the loan. Another example is a homeowner who is in foreclosure. A hard money loan may allow time to pay off the bank and sell the property when a conventional loan will not be granted. There are other examples, but suffice it to say that hard money investors are looking for a higher rate of return, so are willing to accept higher risk to some extent. For the purpose of this discussion, we will use a homeowner who cannot obtain a conventional mortgage.
There are steps you should employ when looking for hard money investors:
• Find hard or private money investors in your area. These investors typically restrict themselves to a geographic area, because that gives them a better sense of home values and other criteria needed to support their investment to a borrower.
• Do research on the investors you find. There are legitimate investors, but there are also investors who may take advantage of you. You may be helped by getting recommendations from Private investors who can’t offer you a loan, but may know legitimate hard money investors who can help you.
• Carefully prepare your documentation regarding your home or other collateral you will use to entice an investor. Equity is an important part of a hard money investment decision, so have records showing the equity you have in your home. You may need income statements, tax returns, and other bank statements to support that you can repay the loan, so it’s best to have the paperwork ready in advance to prevent delays.
• Some investors will have on-line form, others may require a call to their office. Regardless, when you are ready, make an request for the hard money mortgage. The request form process is usually streamlined, and you can often obtain your money in several days. Forward your documentation that supports your equity position with the investors, and wait for an consent.
• Once you have your money, pay off the bank or other primary mortgage that is holding you back. Then, your next step is to start working to obtain a new conventional mortgage so you can satisfy the hard money mortgage. It is essential that you do this so you can remove the higher interest rate that comes with the hard money financing. In addition, the hard money investor may consider their loan a short-term investment, so have a good understanding of the terms you are given with the mortgage initiation.
If you do your research, and work with legitimate hard money investors, you can eliminate a foreclosure, work to restore your credit rating, and retain your home. Keep in mind that a similar process exists if you have a commercial property in financial trouble, with adequate equity and income to support a hard money investor. AHL Hard Money Loans has investors waiting to assist you with your mortgage needs, so call us at (813) 368-9919 and we will work hard to link you to our investors.