postheadericon Is Hard Money Loans For You?

Do you have the dream of making income with real estate? If that answer is yes, then a St. Louis hard money loans are your ticket to maximizing your real estate dreams. 

But, there is some information that you need to know before you pick up that phone and start the loan process.

What is a Hard Money Loan

A hard money loan is a specific type of asset-based loan that is secured with real property as collateral. They are primarily issued by private investors or companies.

These loans are typically fast cash with less strict underwriting standards. These lenders have established their own credit score requirements, debt-to-income (DTI) ratios, and loan-to-value (LTV) ratios, and often, looser than standard mortgage lenders.

How do I Determine the Loan-to-value of the Property?

The LTV is determined by the ratio of the loan amount divided by the value of the property. Most lenders will loan up to 65 -75% of the current value of the property. Knowing the numbers and doing the math is vital in these types of loans.

Who Benefits From Getting a Hard Money Loan

These hard money loans are designed to help people that are:

• Self-employed and find it hard to get a traditional bank loan

• People that want to use real estate as a business; like becoming a landlord or rent business units

• House-flippers use these loans for a quick means to fix up a house and sells it in a short period of time. These can be total revamps to high-end glamour house, either way, you need to know the areas you are investing in property values.

• Extensive home remodeling

• People who want to buy a second home and have been turned down by traditional banks

• People with a foreclosure on their credit report. Most traditional banks will not lend to people with a foreclosure even if they can explain the situation that caused the foreclosure.

What Limitations Are There

The above benefits sound great, but with all the good things you need to know the limitations. These are just some of the limitations that you should be aware of. You need to talk with the lenders to see what their specific limitations consist of before excepting any loans.

• Higher interest rates – 9 -15 %. Each state has regulations limits on how high lenders can set interest rates. So make sure you know yours states’ legal interest rate limits to avoid falling into a predatory loan situation.

• Points, up-front fees, calculated as a certain percentage of the loan that helps lower the interest rate. This range is usually low, 2 to 4 points. One point is about one percent of the loan.

• Short terms, can be as short as six months or as long as 1 – 5 years

• Some might require at least 25 – 30 % down payment or equity to ensure the loan

• Know the loan-to-value of the property

• These loans are meant to be fast cash and fast payback. The longer it takes to pay back the loans, the higher the interest rate will soar.

• Can you pay the loan back early with or without being charged a fee?

Now that your homework is done, calculated all the benefits and risk, and you have some knowledge about hard money loans if you are still ready to pick up that phone, look up a St. Louis hard money loan lender since they are the up-and-coming lenders in this active market, today. 

You will be smiling in your dreams if you do.

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