Hard money loan is a highly specialized financing tool. It is mostly used in real estate industry. The experts of the real estate industry are expected to be well known with its effectiveness but a newcomer or less experienced investors may need to be educated on the subject. This will help them in better decision making. It is extremely important for the inexperienced real estate investors to understand the main advantages of using a hard money loan.
1. Quicker Acceptance of Hard Money Loans
There is no doubt that speedy approval of loans at the time of need is the most important advantage and of critical importance. Same goes in case of hard money loan for commercial rehabs.
This might come as a surprise for inexperienced and newcomers that in certain situations the loan gets approved in one day. The main steps within the process will be:
•Consideration of your property by the lender
•The down payment amount or the percentage of equity by you in the property
•Your experience (if applicable)
•Evaluation of cash reserves you hold to make monthly payments of the loan
If all these factors are satisfactory there is a high probability of your request getting approved.
2. There Are Lesser Number of Hard Money Loans Requirements
Compared to bank loans, hard money lenders set lesser requirements. Some of the important factors they consider are:
•You (borrower) have sufficient equity in the property
•Enough cash in hand for monthly payments
It doesn’t need to be explained that setting little requirement mean there are high possibilities of getting your request approved. On the other hand the banks have a formal and time-consuming procedure and still you remain clueless whether the request will be responded with a ‘Yes’ or ‘No’.
Some of the common issues you will face with the banks are
In a situation like this it is much better to avoid conventional lenders.
3. Hard Money Lenders Won’t Reject You for Being Self-employed
Here is the truth. Banks are unwilling to provide loans to people who are either self-employed or lack a certain years of employment history when applying for the bank loan. In some cases the borrower might be a perfect candidate for loan considering other aspects but, due to rules and regulations the banks may fail to facilitate borrowers.
Luckily money lender supporting the real estate industry will be helpful providing short term loan. The duration of short terms loans is between 1 to3 years enabling you to move ahead. For these hard money lenders sufficient employment history may be secondary due to the fact that you always have an option of refinancing the hard money loan into a lower cost conventional loan after fulfilling the bank’s requirement of certain years of employment history.
These three advantages are extremely important which makes bank a secondary option in real estate industry and provides an opportunity for borrowers to get hard money loans for commercial rehabs without any hassle.