Hard Money Loans Explained


Owning a home can be one of the best long-term financial decisions that you can make. Not only do homes typically appreciate in value, but you can build significant equity through leverage and also hedge against inflation. While buying a home can be a great long-term investment, the large cost of properties in many markets do require you to get financing in most situations.

While there are traditional banks that offer long-term mortgages, these loans often take a long time to process and have tight lending requirements that need to be met. For those that are looking for another option, getting a hard money loan could be a great option. There are a variety of benefits that come when you receive a private money loan as opposed to a mortgage through a bank.

Fast Approval and Funding

One of the advantages of owner occupied hard money loans is that they move much faster than traditional mortgages. When you are looking to get a mortgage from a bank, it often takes weeks to receive pre-approval, and formal approval and funding can easily take up to 45 days. In California’s competitive real estate environment, being able to move faster would be a huge advantage.

When you get a loan through a private money lender, the process will move much faster. After providing some initial information about your finances and the home that you are buying, you can often get a loan approved the same day that you provide. The company is then often able to provide you with a full loan funding within ten days.

Range of Loan Sizes

Another issue that you can have with a traditional mortgage lender is that it is hard to get loans that are of certain sizes. For those that are looking for smaller loans, it is often hard to get the attention of a traditional bank. Those that are looking for larger loans often will have to go to a bank that specializes in these jumbo loans. When you are getting owner occupied hard money loans, you will find that the loan size capability is much wider. These lenders are often able to provide loans for as low as $50,000 and up to $2,000,000 in original principal balance.

Looser Credit Restrictions

Finally, while traditional banks have very tight credit rules that they have to follow, hard money direct lenders can be more flexible. As opposed to having to pull bank statements and paystubs, borrowers do not have to prove their income. Further, borrowers are often able to qualify for a loan even if they have a low credit score.