Hard Money Loans: What To Look For
Usually, when you need a loan as quickly as possible—perhaps to finance a house flip or acquire a property—you’ll find that obtaining a traditional loan is quite tricky. Banks are often uncomfortable with investing in risky ventures, which is where the handy hard money loan comes in. Hard money loans are great options if you need money quickly—they’re easy to obtain and don’t conform to the same regulations as a traditional loan. The thought of receiving a hard money loan might seem like a gimmick, but it’s possible—here’s what to look out for.
Lender
Although hard money loans are much easier to obtain than traditional loans, that doesn’t mean they come without risk, which is why you must choose a trusted lender. When you have a lender you’re confident you can rely on, you’ll feel more secure about getting your project off the ground. Streamline Mortgage has reliable hard money lenders in Henderson who are ready to finance your project and get you going as soon as possible.
Down Payment
One of the main aspects to a good takeoff is a down payment. When you obtain your hard money loan, the bank will provide you with a certain amount they expect you to pay off in a short time. Due to this, you’ll usually have to put in a down payment of about 25 percent of the loan amount, although this percentage can change based on several factors, such as your experience, the risk, and the loan-to-value ratio.
Loan-to-Value Ratio
Something you should look out for when obtaining your hard money loan is your loan-to-value ratio. We calculate this ratio by dividing your loan amount by your property’s appraised value. The lower the numbers are, the higher your down payment will be, and vice versa.
If your required down payment is going to be high, there’s no need to worry. You may be able to lower it if you have prior successful experience with house-flipping. Your lender may feel more comfortable lowering the down payment when they can trust that you’ll be successful. Moreover, you can also put up another property as collateral.
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