In times of financial constraints, the majority of people apply for a loan to make ends meet. There are different types of loans, and one of the commonly sought after is hard money loan. It is a loan secured by real estate property and usually given by private companies or individuals. To be eligible for such type of loan, you need to have collateral in the form of real estate property.
What’s good about private money loan is that it does not look over your credit history. For as long as you have collateral, you can apply for a loan. You will be considered a non-risk borrower because you secure your loan. Once you fail to make payment, the lender takes the collateral in exchange for the failed payment.
How long will it take to get a hard money loan?
If you are in need of cash the soonest time possible, a hard money loan is the best choice as it would only take a few days to process and have your loan approved. For loan terms, it ranges between one to three years. However, one of the downfalls of hard money loans is the high interest rate. The longer the term, the higher the interest rate. To be eligible for a hard money loan, the following has to be met:
For residential properties, the down payment ranges between 25% and 30%; for commercial properties, the down payment ranges between 30% and 40%.
You have to show the lender you have the necessary cash reserve to make holding costs like taxes, insurance, and homeowner’s association payments.
Real estate experience
Your experience in the real estate market is another factor that plays a huge part in getting your loan approved.