Hard money loans are mainly used as a source of leverage for real estate investors searching to increase their capital or as a source of financing that can be available faster in order to capitalize on a time sensitive investment chance. This loan option can be a confusing topic for a new, and even some experienced real estate investors. To develop an easier design here are some of the most general questions about hard money loans that you may want to know before going for it.
What is The Role of Credit Score for Hard Money Loans?
A credit score is not a major factor when you are applying for a hard money loan but a lender will ask you about that. Basically, when a lender checks your credit score, they are not necessarily looking at your score but they give special focus on your credit activity. A bad credit score is not only the cause of a broken deal for hard money loans. If your credit is getting a good health and your recent credit record is healthy, then you should not have any problem.
What is The Length of a Hard Money Loan?
As we all know that every loan program has its own length. Hard money loans almost always have a 12-month maturity date. Still, you have some options such as it can be extended depending on the situation. Basically, asset based lending does not charge pre-payment penalties, many debtors pay off the loan before 12 months maturity.
Do hard money lenders care about the specifics of the project?
Yes, hard money lenders care about the specifics of the project. During the underwriting process, a loan officer from the lending company will go through all of the deal economics with you to make sure that your project is profitable for all involved. As an investor in real estate, you surely want to make a standard return on your investment. On the other hand, lenders also try to fund your project where everyone can make a good amount of money.