Many may wonder what to look for in a hard money lender. However, one needs to understand the basics and that begins with understanding what a hard money lender is and what they actually do. A hard money lender deals with loans that are of a particular type dealing specifically with asset-based financing. The person wanting to borrow the funds (simply known as the borrower) uses collateral to secure the loan.
The hard money loan is normally secured with real property. Real property being land and anything like a building, pond, machinery; not to mention, other things like canals and roads, etc that are directly attached to the land. Companies and/or private investors mostly give hard money loans. There are usually higher risks involved with hard money loans. Therefore, interest rates with a hard money loan in most cases are higher than the traditional residential property loans conventional commercial .
One needs to consider and look for a hard money lender because of the pros and benefits that go along with this type of loan. The process and speed of this type of loan is fast when compared to the traditional residential property loans or conventional commercial loans. The hard money lender is eyeing the collateral mostly and is not as concerned about the borrowers financial ability to pay like banks and traditional loans. Therefore, a long drawn out loan application process is essentially not applicable as the lender would rather have the property used as collateral. This type of loan is mainly a short term loan for projects that lasts for only a few months but sometimes it can be a few years (still not that many).
Another benefit and reason why a borrower may turn to a hard money lender is because of the flexibility. When looking for a hard money lender, one will notice that there is no standardized or uniform underwriting process. Each deal is evaluated on an individual basis. Payment schedules can be adjusted as needed in most cases depending on the deal and agreement. An individual investor hard money lender may be willing to bend or compromise on certain things that even a corporate hard money lender would not bend or compromise. Although they (referring to corporations) are not like the domineering bank requirements, corporate hard money lenders more than likely have strict business policies that have to be followed and considered. Whereas, an individual investor hard money lender can be as flexible as they like (again they are eyeing the collateral more than anything else). In addition, one should look for an approval with ease when checking out a hard money lender.
Again as stated before, the collateral that asset-based real property is the most important thing. In some situations the hard money lender, be it an individual investor or a corporation, may not even look at the borrowers credit history. The loan to value ratio is often kept low when dealing with a hard money lender. The ratio of the highest loan to value might range between 50 percent to 70 percent because one has to have the right asset to be considered for a hard money loan. With the ratios kept at the low range, the hard money lender can expect to sell the property fast and have a good chance of getting the money that they loaned back. Hard money lenders in NC share in the same benefits to borrowers as other hard money lenders. Although seasoned flippers and rental property flippers are probably even more familiar with hard money lenders in NC, it is for anyone with a need and a good asset.