Contrary to what some believe, “hard money” does not mean hard-to-get. Hard money lenders like TGP Funding have an underwriting process, lending parameters, and standard business operations just like traditional lenders. I have found I enjoy the flexibility and speed that hard money lenders deliver for their clients. Here are some things to know about hard money loans:
1. Hard Money Is a Legitimate Business
A Hard money lender is a company or individual who lends as a business. They operate very similarly to a bank. These lenders can usually underwrite a loan within 24-48 hours and can fund these loans in a matter of days. Some lenders like TGP Funding manage a trust deed investment fund as well. Investors invest in the fund and the fund manager lends money to borrowers looking for hard money loans or bridge loans.
2. Hard Money Just Means a “Hard” Asset Backs the Loan
A hard money loan is a real estate-backed loan where a borrower receives funds secured by the equity in their property (or properties). The word “hard” means an asset. Hard money lenders like TGP Funding are mainly focused on the equity in the property as opposed to the borrower’s financials or credit score. Hard money loans are typically short-term, ranging from six months up to two years.
The 2 main qualifying factors for hard money lenders like TGP Funding are equity in the property and the location; opposed to the borrower’s financial situation or credit score.
3. Hard Money is Great For Foreclosure Bailouts
When it comes to foreclosure bailouts, time is of-the-essence. Hard money lenders can usually meet the demand for a quick turnaround for funding on these types of loans. A good hard money lender can usually fund in about 4-10 days, depending on the complexity of the loan scenario. You want to find a hard money lender with an experienced underwriting team who does a thorough underwrite before issuing terms. The last thing you want is surprises when you have an upcoming sale date.
Also, San Diego hard money lenders are not usually concerned with the borrower’s credit score or financial situation. These loans are typically based on the equity in the property and the location.
Here are lending parameters for foreclosure bailouts with TGP Funding:
- Under 600 Fico ok
- A day out of BK
- Loan amount: $100,000 to $1,000,000
- Up to 65% LTV
- 10.99%, interest-only payments
- 2-year term with 12 months prepay penalty
4. Foreign Nationals may be eligible for a hard money loan
Foreign nationals are often unable to secure a traditional bank loan as they are not US Citizens. Hard Money lenders will often work with foreign nationals to finance their projects. Here are some guidelines for
- 35% Down Payment
- 6% Interest
- Up to 30 years term
Unlike a bank:
- No Social Security Number Required
- No US Tax Return Required
- No US Credit History Required
The borrower will need:
- Funds in US Bank for 60 days
- Passport Copy
- US Visa
5. Hard Money Rates Are High, But Here’s Why
Yes, hard money lenders do charge higher than average rates, but it doesn’t mean you can’t profit. With hard money, you could be looking at rates of 8-10 percent along with two to four points. Despite these higher rates, the tradeoff is you can usually get these loans funded in a matter of days. Many use hard money as a bridge to long term debt or pay off the loan when they flip the property.
An interest-only loan is a loan that temporarily allows you to pay only the interest costs, without requiring you to pay down your loan balance. The monthly payments for interest-only loans tend to be lower than payments for standard amortizing loans, allowing you to free up capital to put towards your project.
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