There are many reasons why a borrower would choose to use "hard money" loans to meet their borrowing needs. A hard money loan is simply a loan secured by property.A more familiar term may be private mortgages.There is a lot more involved in the loan process however in plain English it amounts to a simple exchange of money for collateral. A borrower receives money and grants a mortgage chargeto a lender. Lender registers the charge against the title of the subject property and releases money to the borrower.
There are always 3 basic items involved in a mortgage transaction, excluding the property involved in any hard money lending transaction:
1) Credit
2) Income
3) Down Payment / Equity
A borrower can lack any one of these three items and need a "hard money" loan. A good rule of thumb is if you lack any one of these three factors, huck money at the other two. The best way to find out if you lack any of these is to apply directly for a mortgage. Bar that, here is a general guidelinehow you "throw money" at the items you miss :
1) If you lack credit: Add Income and/or additional down payment / equity to your mortgage application. A borrower can add income by including bonuses, or simply adding a co-borrower who has a job and makes income. Adding down payment or equity would amount to injecting some more of your own skin into the transaction . In the case of a purchase maybe this means more capital you put down. If you are refinancing, this might mean granting security on a second property or another asset. If you don't know what your credit score is, I highly recommend you pull your own credit straight from the credit reporting agencies directly.
2) If you lack Income: Make sure you have strong credit. Through your credit bureau a borrower will want to show an excellent credit score with strong record of on time debt repayment, and under limit credit products . Borrowers will also want to increase the strength of their down payment or equity positions as stated when you miss credit.
3) If you miss Down Payment / Equity: I need to clarify here. By missing I don't mean you have zilch down payment or equity. Rarely ever in current real estate conditions will you see zero down payment deals. In this context I mean lacking enough down payment / equity to minimize the risk significantly enough to make a lender feel secure in lending you money. In this case a borrower should certainly have strong credit (as stated in "If you lack Income"), and a strong stable income source. By strong and stable, lenders really mean guaranteed. Guaranteed income can be employment income or business for self income. Although in both cases, lenders like to see a track record.
This list of "throw bread at it" items is not a comprehensive list, but a general guideline for hard money lending. Private lenders decision applications based on risk. It is accepted that hard money lending is higher risk for the lender and as such usually has higher rates and fees applicable to the mortgage . Every private lender has their comfort level for risk. Just as the consumer has their own risk comfort level for their own investments, so to do private mortgage lenders for the money they output .
Here are four quick pointers on how to maximize your chances to have your hard money loan approved:
1) Keep organized records. In private mortgage transactions , you more than likely will be conditioned for additional paperwork over and above normal requirements. Confirmation of some debts being paid, property taxes being current , recent pay stubs, payment history of utility bills, and more. The better document keeping you have, the easier it is to provide this documentation and the easier your transaction will go .
2) Put forward the strongest possible application you can. If you have over balance credit products, pay them down below balance before you apply for your mortgage . If you need to boost your application overall, consider bringing on a co-sign . A co-borrower with good credit and good income can go a long way to strengthen your loan application. It can also mean better rate .
3) Make your house neat and presentable when the appraiser inspects. Almost all private mortgage transactions are subject to an appraisal. When the appraiser visits, first impressions are everything. The property value your lender expects has a better chance of being realized if your property is in very presentable condition.
4) If you have had bumps in the road with respect to your credit, make sure you let your broker know the story behind it. Brokers understand that life happens, and turmoil can have a detrimental effect on your credit. We just need to know why. Apply Now and have your broker review your situation.Hard money lending is generally all about the property condition, the equity involved, and a story behind which of the three necessities is missing from the deal and why.
Credit score is just a snapshot of a point in time where you are at. If you have rough credit, it can certainly be fixed by taking the right steps. Some simple things that you can do to improve your credit are: settle any bad outstanding debts like judgements or collections, always pay yourminimum amountby the due date, finance your credit products to a maximum of 75% of their balance, minimize the amount of credit checks you authorize for potential creditors.
Now that you have a basic idea of what hard money lending is and how it works in the general sense, it's time to get your loan approved! Gather your documents in an organized binder, fill out that client agreement from your broker, and put together your application.
Approvals happen fast! Remember too that hard money lending is a short term mortgage to get you where you need to go. Since they are higher priced mortgages , they are not products that you want to sit in longer than a year or two.
If you want to get started onyour hard money loan, visit http://www.michaelmcivor.com/applynow.php to get the ball rolling.
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