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Take Note Of These Points When Dealing With A Hard Money Lender

Written by Posted On Tuesday, 20 August 2019 02:22

If you need some funds for your real estate immediately or are having issues getting your loan approved, you probably considered visiting a hard money lender in Denver but weren’t sure about how hard money loans work. The concept of hard money loans are simple, you prove you have a solid collateral, the lender gives you a loan and you pay it back on time with the agreed interest or the lender reimburses it from your collateral. Hard money lenders provide loans quicker than other lenders, usually in a week, because their main concern is your collateral’s market value.


How to find a hard money lender:

Don’t go to the first money lender you find, research how many there are in your area so that you have many options.


Talk to People People like real estate agents and property owners usually deal with cold cash lenders because like you they are usually in need of some quick cash.

Online Forums: If you don’t know anyone who deals with hard cash lenders offline, you might find someone online.

Websites: Money lenders may either host their own sites or post on classified sites. A quick web search should do the trick.


Things to take note of before agreeing to a hard money loan:


Interest Rates: Most hard cash lenders charge high interest rates, about 15%, which you are expected to pay within a short term, like a year.

Points: You can expect a reprieve of  2-4%.

Loan to Value (LTV) Ratio: Most lenders provide a low LTV ratio, about 50-70%, which means if your collateral is valued at $1 million you can expect $500-700 thousand.

After Repair Value (ARV): Some lenders may provide loans based on your property’s value after renovations rather than its present value. This means that if your property is currently valued at $500 thousand and after renovations it is estimated to cost $1 million and the LTV is 50%, you will receive $500 million rather than $250 million.

Term: Hard money loans are short term loans. They usually range from 12-24 months.

Upfront Fees: Lenders charge for appraisals and documentation.

Penalty Fees: If you cross the deadline for your loan you, the deadline may be extended but you will be charged as penalty in this case.

Hidden Fees: Never forget to ask about hidden fees.

Contract: Read all the terms and conditions carefully, if you find something confusing clarify the terms in the contract before you agree to it.

Your Budget: The loan from the property may not cover the cost, in which case you may either cover the rest of the cost from your own pocket or use another property as collateral.


Things the hard money lender may ask for:


Your Purpose: Hard cash lenders provide loans for land deals, construction, fix and flip projects, quick funds for real estate and buyers who have credit issues.

Collateral’s Market Value: The amount of cold cash you receive depends directly on your collateral’s market value. This doesn’t always mean the present value of the property. If the lender charges ARV, your property’s value is based on its potential value after construction, renovations or any other projects you have planned. Be sure to carry your property’s architectural plan, construction budget, etc.

Market Value in the Area: The lenders might be interested in the market value of other properties in the area to estimate how the value of your property may rise or fall in the future.

Your Budget: Your lender may be interested in how much capital you have in case the loan doesn’t cover the project’s cost.

Your Financial Documents: Like bank statements, paystubs, W-2s, and other items in your credit history lenders usually ask for.

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James hoff

I'm a writer; illustrator, columnist and an editorial fellow in Real Estate Company Olde Florida Realty. My previous work includes roles in digital journalism and content writer. I did graduation in Journalism. For my Post graduate thesis, i researched on Communicative Science and Disorder. With my sole insights into how people thinks and motivations, i help client to develop and strengthen their brand. I'm excited to join Thrive in its vision to accelerate the society budge.
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