In today’s real estate market, a traditional loan can sometimes be hard to come by. Fortunately, hard money loans mean that it is no longer necessary to jump through all those hoops set up by your bank in order to get a loan. There are several things to understand about these loans including how they work and what you need to do to secure one. There are numerous Houston hard money lenders out there, but knowing the basics is important first.
With that in mind, here’s what you need to know about Houston hard money loans and your finances.
• A hard money loan is a kind of loan that is given to a borrower that results in them having the money in their bank account – not to buy a home.
• These loans are backed by the value of the property you own or are buying instead of a borrowers credit score.
• The added risks to the lender mean that interest rates are higher. However, these are often last resort loans that could help you secure the money you need when nobody else will approve you for a loan.
• Qualifying for a hard money loan depends upon the purpose of the loan and the lender themselves. In most cases you can secure a loan for about 65% to 75% of the total value of the property being used in the loan.
There are a few types of hard money loans out there, but the two primary options are commercial and residential hard money loans.
• A residential hard money loan works according to the basic guidelines above. The borrower will take out a loan based on the value of the property in question. Defaulting will mean foreclosure, and the lender will take over the property.
• Commercial hard money loans in Houston TX have similar structures in terms of their interest rates and the loan to value requirements, but are issued for commercial ventures or properties. A property may be in distress or need additional funds in order for construction to be completed, for example. In these cases a hard money loan can help pull the property above water again.
No matter if you need a hard money loan for residential or commercial properties, the key to securing one is taking the time to review the interest rates, terms, and overall structure of the loan you’re considering. Take the time to understand everything you’re signing and you’ll be able to get the loan that you need. Sometimes, a hard money loan is exactly what you require.