Hard money loans are a staple of real estate investment financing. Hard Money loans are a private lending alternative for real estate investors. Private investors/Lenders will lend their money and will use the property as the collateral. It is incredibly important to understand the hard money loan process before you start investing. If you are interested in hard money loans, you should have a grasp on the parties involved.
Borrower: That’s you! The borrower is the individual buying the investment property.
Seller: The individual who owns the property that the borrower intends to buy.
Hard Money Lender: This is the lender who is matching the borrower with the loan investment. They manage the loan application, processing, and underwriting. The lender, or broker, is the middle-man who connects you with the individual or company providing the financing. A hard money loan is simply a short-term loan financed by a non-traditional lender.
Title Insurance Company: This company provides the preliminary title report on the property serving as collateral for the loan.
Escrow Company: The third party that collects and disburses the funds as directed by the private investor.
What makes hard money loans so popular with real estate investors is that the hard money loan can be in the hands of the borrower in a matter of days. Hard money lenders can provide finances quickly because the loans are funded either with their own funds or by private investors. Considering there is less paperwork and red tape, the loan can be approved quickly.
