What did you think of when you first heard the term, “hard money lending?”
Is it something like getting some hard cash quickly to wrap up a business deal? Or, is it a loan structure with utmost flexibility? Well, in both cases, you’re not too far off your mark.
If you need some quick hard cash for some reason, going for a hard money loan may be ideal for you. However, as it’s a new concept, you shouldn’t barge in without learning about it.
Let’s get started, then.
Hard Money Loan In Texas – An Introduction
A hard money loan, in essence, is a non-conforming, short-term loan, which is primarily used to buy an investment or commercial property. However, unlike a traditional loan, you will not get it from a bank or any other conventional lender, though.
Instead, it will be given by a private company or people who accept an asset, like a house, as collateral. Hence, with it, you won’t have to worry about your credit score or anything and can be done directly from a licensed money lender.
Here’s another fact.
Like a conventional mortgage, a hard money loan is a type of secured loan, as it’s guaranteed by the house you’re buying. Although the approval process is quite minimal, you might end up losing the property you’ve bought. So, be careful about it.
What Does The Process Look Like?
Unlike a traditional loaning system, the infrastructure of hard money loans is pretty simple. In this aspect, you’ll have to take a proposal of buying a house to a hard money lender. And, they’ll provide the required amount of money depending on the value of your asset.
However, before doing so, they might do a quick check of your finances first. It usually won’t matter, but they’ll do it as a part of their own protocol. In any case, the whole procedure ends quite quickly. So, you will get your money within a week or so.
Nonetheless, unlike what you’re thinking, taking a hard money loan does come with its own set of risks and isn’t all snows and flakes. There’s quite a massive downside to it as well.
In a hard money loan, a lender usually takes a huge risk. After all, there’s no guarantee that it will be possible for you to sell the property, right?
Due to this reason, they tend to ask for a not-so-small interest rate. In some cases, they might also ask for around 20% of the amount as a down payment.
It’s only done for their own safety, so you have to cope with it somehow. However, if you’re able to talk to them about it, we think you might not have to pay something so expensive.
What Should You Know About The Lenders?
Although the proposition of getting some money seems amazing, you still have to be cautious all the time. After all, you’re getting in it for quite a lot of money.
And, we don’t think it’ll be the right thing to get scammed. So, keep the following things in mind while choosing an option for your cause:
- Usually, hard money lending comes with an interest rate of somewhere between 6% to 15%. And, anything lower than that won’t be legit at all.
- The contract terms must be clear as the day in a hard money loan structure. Or else, it might indicate that the loan will come with some sort of hidden issues.
- A hard money loan is always provided after taking your house as collateral. In case a lender is asking for something else, we think it’ll be better to avoid them.
- With a hard money lender, you must offer a small amount of cash for the application. It should be provided while they’re approving the loan, not later.
Apart from the benefits from hard money lending, you will also have to pay the origination fee, money for the inspection, and appraisals. There might be something related to discount points available there. So, make sure to keep a close eye to that if you don’t want to get scammed somehow.
Get Your Loan Today!
You might have a “hard” time to find the best hard money lender for your business. Thus, it’ll be ideal for you to look for references from someone you already know.
Doing a little bit of searching and finding online can also be beneficial. Finally, once you find someone, don’t forget to set up a face-to-face meeting with them quickly.
Don’t talk to them over the phone and accept their terms. Go to them, have a meeting, and tell them about your plans. Hopefully, that’ll clear up everything you want to know.