Hard Money Easy Access

A Hard Money Loan is a type of short-term loan secured by real estate, primarily used by investors to finance property purchases, renovations, or development projects. Unlike traditional bank loans, hard money loans are based on the value of the property rather than the borrower's creditworthiness. These loans often have higher interest rates and shorter terms but offer faster approval and funding, making them ideal for quick-turnaround projects like fix-and-flip properties. They are typically provided by private investors or companies rather than traditional financial institutions.

REQUIREMENTS

The requirements for a hard money loan differ from traditional loans and are primarily focused on the value of the property rather than the borrower’s credit score or financial history. Typical requirements include:

1) Property as Collateral: The most important requirement is the property itself. The loan is secured by the real estate, and the lender assesses its value (usually through an appraisal) to determine loan eligibility.

2) Down Payment: Most hard money lenders require a down payment, which can range from 20% to 40% of the property's purchase price or after-repair value (ARV). The exact amount depends on the lender's risk tolerance and the property's condition.

3) Equity in the Property: If the borrower already owns the property, hard money lenders typically want the borrower to have substantial equity in it, which reduces the lender’s risk.

4) Exit Strategy: Lenders often require a clear exit strategy—whether the borrower plans to sell the property after renovation, refinance into a conventional loan, or some other means of repayment.

5)Loan-to-Value (LTV) Ratio: Hard money loans are typically based on a Loan-to-Value ratio, which is the percentage of the property's current or after-repair value. Most lenders will lend up to 65%-75% of the property's value.

6) Proof of Financial Capacity: While less stringent than conventional loans, lenders often require proof of the borrower’s ability to make the monthly interest payments during the loan term (this could include bank statements or proof of income).

7) Experience: For real estate investors, some lenders may consider the borrower’s experience in fix-and-flip projects or real estate investments. Those with a solid track record may have more favorable terms.

8) Inspection/Repairs Plan: For fix-and-flip projects, lenders often require a detailed scope of work or repairs plan outlining how the borrower will improve the property.

Unlike conventional loans, hard money loans do not usually require strong credit scores or in-depth income documentation. The focus is on the property’s potential and the borrower’s ability to execute the investment plan.