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Hard Money Loans (a primer)
| | Tuesday, November 04, 2003 @ 08:00 AM EST
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Contributed by: Kyle Gatton
Kyle Gatton Properties
Read more archived articles about Credit and Finance
hard money loans are expensive and tricky, but most of all a very necessary evil. If you decide to get one please take careful note of the following:
hard money loans are expensive and tricky, but most of all a very necessary
evil. If you decide to get one please take careful note of the following:
Interest points
Entry points or just Points
Exit points
Fees
Penalties and/or Pre payment penalties
If you want quick money it is definitely the way to go. But you need to make sure your deal can afford such a cost. If you factor in a cost of 25% of the amount loaned, you will be close to what it actually costs to do a hard money loan. Other terms will be mezzanine, bridge, quick, or fast, but they all fall under the category of "hard money".
You will also want to check your credit as the minimum I have seen needed is 620, some will go lower, but most will want a 680 middle score. Obviously the higher your credit the lower the costs. And do not think that it is a no money down loan, as most will want to see some of your(or borrowed) money into the deal. Ask them up front if the money put in needs to be sourced (in your posession) or seasoned (has been in your posession for 60 days). If it doesnt then you can borrow the down payment. If it does check your seasoning requirements. and make sure you qualify before moving forward.
This type of loan should be considered only after all of your private money sources and conventional means have been extinguished. Its the same as a payday loan, only get it in emergency situations.
If you have a non conforming house, a property that has too many businesses on it, or a business that has potential but not good cash flow as is, then a hard money loan is for you. But again make sure that the deal is so good that you are buying it for at least 75% or less of its potential worth, as it will cost you enormaous fees to get it. Factor in the 25%, take a deep breath and lunge into it if that is what it will take to close the deal. There are over 4000 loan programs available as of the writing of this article. There is no way for you to check each one to see if your deal and you qualify. So hard money loans are made available for this reason. All deals qualify for hard money as long as the property is worth a certain percentage of the loan.
.......Kyle
Word Cloud:
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