Hard money financing is a short-term loan secured by real estate rather than the borrower’s creditworthiness or their ability to make monthly payments over a long period of time. Hard money loans are offered by hard money lenders or a private lender.
The most common use of hard money financing is for fix and flip investors. A real estate investor brings a deal with profit potential (meaning a property that can be fixed up and resold for a profit) to a lender. Rather than looking at the borrower’s debt-to-income ratio, they’ll investigate whether there’s enough profit potential in this deal to pay off the loan after the 5-12 month loan term is up.
Many hard money lenders look at credit score, but it plays a less important role than in a conventional mortgage. Many lenders also require prior successful flips as well as larger down payments than with a conventional mortgage.
In order to justify the risk of a short-term loan, hard money lenders also charge higher interest rates than traditional banks-often 10% or higher. However, the interest costs aren’t exorbitant because loan terms are so short.
What Does 100% Financing Mean?
- Purchase Price
- Repair Costs
- Loan/Closing Costs
For most hard money lenders, 100% financing means they lend up to 100% of just the purchase price of the property. They’ll lend perhaps 90% of the repair costs, and then the borrower also brings the loan/closing costs to the table as well.
With most hard money lenders, you’ll be required to bring 20% or more of total project costs to the closing table, often totalling $30k – $50k-even with lenders that advertise 100% financing.
We’re the only hard money lender that offers true 100% financing. In other words, for great deals, we don’t require our borrowers to bring any cash-to-close. While other lenders won’t take on that much risk, our proven system, risk evaluation, and resources have allowed our borrowers to thrive even without putting any money down.
Start With Less Cash
t’s more than just nice to bring less money to the closing table. We recognize that most new investors simply don’t have $30k to bankroll a deal.
We believe that you shouldn’t have to already be rich to complete a deal. This is just one way that we open the door for more new investors to get started.
Less Risk For You
With Do Hard Money funding the entire deal, more of the risk shifts over to us. While it’s still not an entire risk-free endeavor, you’re less likely to lose big on a bad deal.
More Deals at Once
If each deal costs you $30k or more to complete, that’s going to limit the amount of deals that you can do at once.
While we https://homeloansplus.org/payday-loans-ks/ recommend not taking on too much at once (especially if you’re new), we also don’t want you to wait 6 months for your deal to finish to start on the next one. With 100% financing, you an afford to start on that next deal whenever you’re ready.
How Do You Qualify for 100% Hard Money Financing?
We are willing to lend up to 75% of a property’s after repair value (ARV)-so if you can fit all your costs under that 75% number, then you’ve got a great shot at 100% financing.
Let’s say that you find a property that you believe will sell for $300k once you’ve fixed it up and sold it.
$300,000 x 75% = $225,000
Now, you believe it’s going to cost you $50k to fix it up, and another $20k in closing and loan costs.