The First Rule of Hard Money Loans
Posted July 2nd, 2009 in Mortgage Loan InsightsIf you're new to "hard money" loans it's likely your basis for understanding and comparing hard money lending will be what you already know about conventional bank loans.
Bank loans are bank loans. Hard money loans do not compare to bank loans. They are polar opposites in both form and function despite having common logistical processes.
The best bank loan offers the lowest rate and fees and longer terms. A hard money loan (secured by residential property for purposes of this article) is a short-term fix with a premium price tag that's less restrictive in some ways and more restrictive in others, designed to bridge a gap between situations until it can be paid off or replaced with a bank loan.
Qualifying for conventional loans from banks and credit unions, however, is difficult or impossible for many people today for various reasons. Government loans — FHA, VA, and the like are available to those with less money to invest or who have less-than-perfect credit, but other factors like income, debt ratios, employment, and assets still matter. Second mortgages are very difficult to secure, most lenders restrict the amount of properties you can have financed at one time, and banks adjust their lending guidelines fast and often, sometimes terminating a loan approval midstream. It's no wonder then that so many people today are looking to hard money loans as an alternative to bank financing.
In some cases a hard money loan may prove to be the answer, provided you're goal-oriented as opposed to "process-oriented". The two are not the same, nor can they co-exist–you are predominately one or the other. It's a scientific fact that the left side of the brain processes analytical information such as interest rates, fees, payments etc, while the right side of the brain is the creative side and adept at considering the "bigger picture" like the goal of consolidating debt or the dream of owning an investment property. Humans are either left or right brain dominant and this effects how you perceive the loan.
The truth is that the overwhelming number of people who inquire about a hard money loan will never obtain one. There are two primary reasons.


