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Whether you are buying a new house or investing in real estate, getting the right financing can help you make the most of your property purchase. Many borrowers find themselves considered hard money loans if they have difficulty with conventional mortgage approval.
Hard money loans are most often used by real estate investors who want to take advantage of a valuable opportunity. In some cases, residential bridge loan lenders may help homebuyers place a down payment on a new home before they have sold their previous homes.
In either case, knowing how to get approved for these short-term loans can be helpful. The following tips will help you get started.
The Process
One of the great parts about hard money loans is that the process is typically much simpler than a bank mortgage. There will be a loan application to fill out and some financial statements to submit. However, most private lenders for real estate will not take as long on the underwriting process as banks.
This speed is one of the reasons investors like to use hard money loans. They provide a chance to take advantage of time-sensitive opportunities.
Hard money lenders will often work with people with less than perfect credit. They are not as heavily regulated as banks and can be more flexible.
Getting Approved
The property is typically the most important part of getting approved. If the real estate is not a good investment, you will have a hard time getting a hard money loan. Conversely, if it is a good choice, you will likely be able to get some great offers from hard money lenders.
Another factor is your plan for the property. These loans are often used with fix and flip projects. If that is what you are doing, you will need to submit a budget and plan for your project. If you know what you are doing and have some experience, you will have an easier time getting approved. Nonetheless, even beginners can get approved if they have a good plan.
The lender will likely request a broker’s price opinion or appraisal. This is a third-party assessment of the property value. The advantage of this is that you get someone else looking at your deal to make sure it is sound. If a lender isn’t willing to work with you, chances are that you should reconsider the project.
Down Payments
You will need to pay a down payment, as with any other type of real estate loan. The hard money lenders Los Angeles borrowers turn to often ask for between 20% and 30% down. This is a little higher than conventional loans. In some circumstances, you may be able to negotiate a lower down payment if the project is a good one.
Get Started
You may be surprised how easily you can get an approval with a hard money lender. Start contacting a few and see if your proposed real estate purchase is of interest to lenders. You could receive funding in as little as a week if you work with the right lenders.
