Every real estate investor has at some point heard of hard money loans. The main things that come to mind when most real estate developers think about hard money loans are flexibility and speed. However, there is more to hard money loans than these things. Here, we will be looking at some of the reasons why hard money loans are the go to when real estate investors need financing.
The first benefit of hard money loans is that they have fast approvals and funding. Applying for a hard money loan is not only a simple process but also a straightforward one. Many lenders will only require you to fill out a standard loan application form. You can get your conditional loan in a matter of minutes after you do this. When you compare this to bank borrowing where one is required to fill out pages of the application, wait for approval or response, you find that hard money loans are the way to go. If you apply for a regular bank loan application, you have to wait for weeks or months to get approval, which is enough time for the property you have your eyes on to be snatched by another developer. With hard money loans, you can get the funding you need in a week or two. If, however, you need the money urgently so a property you want cannot be bought by someone else, you can ask the lender to approve funding in a matter of days.
The second benefit of hard money loans is that they make offers made by real estate investors stronger. If you make an offer with a hard money loan, you will be considered first. This is more so if the property at hand has received multiple offers from other investors with conventional bank loans. If you have been in the real estate industry for some time, then you have probably heard of banks pulling funding from buyers during escrow, thereby jeopardizing the entire deal. This is something sellers want to avoid, and they, therefore, choose hard money loans Chicagoover conventional bank loans that they provide. Hard money lenders are not known to pull funding from projects for arbitrary reasons, and this is why sellers tend to trust them more than the banks.
Thirdly, you can negotiate for a lower purchase price if you choose to finance your project with a hard money loan. This is because of fast approval and funding. Real estate investors can negotiate for a lower purchase price if they are buying in cash or if they are financing themselves with hard money loans. This is because both come with the promise of a shorter escrow period. Most sellers are willing to lower their selling price for a fast sale.
Another benefit of hard money loans Chicagois that they are not dependent on borrowers’ credit scores or income histories. A hard money lender will look at the value of the property you are putting up as collateral when lending you money. Hard money lenders will look at your down payment of the said property as your equity, and will give you the money you need if they are comfortable with the results of the property’s valuation and your equity.
