What You Need to Qualify for Hard Money Loans

A hard money loan is a competitive alternative to traditional bank loans. If you’re looking for private money lenders for real estate, it’s important to know what it takes to qualify for a loan. Find out today if you qualify for a hard money loan to execute your real estate investment strategy.

Down Payment

This type of loan is primarily backed by the value of your real estate. While this doesn’t require a high credit score, it does require a down payment or collateral. There are two basic ways you can safely back your hard money loan.

First, you can provide up to 30% for residential or 40% for commercial real estate. This down payment ensures that your lender receives their investment back in the event that you’re unable to repay the loan.

The second way to back your loan is through cross collateralization. This involves borrowing equity from one or more properties. Even if you don’t have thousands of dollars in the bank you can still use a hard money loan. Simply borrow against another investment property or your primary residence to offer the collateral necessary to become approved.

Exit Strategy

Hard money real estate lenders want you to succeed. Reputable lenders aren’t looking for a way to cause you to default on your loan, so they are interested in your exit strategy. You’ll need to detail your investment strategy and how you plan on repaying the loan and earning a profit within the term limit. This portion of the application is also useful for you, since putting your ideas down on paper can help you see any errors in your plan and adjust accordingly. A firm exit strategy means you know when it’s time to sell the property or how you’ll earn enough through leasing to repay the hard money loan in full.

Financial Strength

Are you diving in over your head? Another way to show that you aren’t taking on more than you can handle is proving your financial strength. This isn’t a credit check, but simply is a way to show that you’re capable of making loan payments and covering insurance, taxes and other fees while you renovate, lease or fix and flip your property.

In some cases, you may not immediately have the funds necessary to cover these expenses. As long as you have a firm exit strategy, you may be able to negotiate with your lender. Instead of being denied a hard money loan, you may be able to have the lender cover these costs for the first few months as you prepare your exit strategy. These costs will be added to the total of your loan, but in some cases this can still be a better way to invest in real estate.

Apply for a Hard Money Loan Today

Explore your hard money options today to find the best hard money lenders in California. A local, reputable and friendly lender can assist you in completing your application, shoring up your exit strategy and accomplishing your investment goals. Grow your investment portfolio quickly with the help of a flexible hard money loan.