Newer real estate investors in Pennsylvania have questions about hard money loans and whether hard money lenders licensed PA could help them grow their business.
Maybe you’re new to real estate investing and looking into what your options are. Or, perhaps you’ve flipped a house or two and you’re looking to scale up your business. You’re about to discover “the special sauce” that turns amateur real estate investors into professionals, allowing them to grow from just doing a few occasional flips to building a flipping business. Hard money loans have made the fix-and-flip industry what it is today. So, let’s answer some of the frequently asked questions about hard money lenders licensed PA.
What is a hard money lender?
Hard money lenders quickly provide bridge financing to real estate investors for the purchase and rehabilitation of distressed homes. Hard money lenders are financial businesses that lend money based more on the property you’re buying, rehabbing and reselling rather than on your credit score.
How is a hard money loan different than a bank loan?
While a bank loan (a conventional mortgage) would fund up to 80% of the purchase of a house, a fix-and-flip hard money loan could be negotiated for varying amounts, usually up to 60% to 80% of that house’s appraised After Repair Value (ARV). This loan would cover not just the purchase, but also repair and rehabilitation costs. The bank mortgage has a 30- to 45-day approval time and a term between 15 to 30 years. Hard money loans are approved much more quickly and could have a term of one year or less. Bank mortgages offer 4- to 6% interest rates and have no lender fees, usually called “points.” Due to the shorter terms and higher risk, hard money loans have higher interest rates, like 8 to 12%, and lender fees of 2 to 10 points (each point = 1% of the loan amount).
What are the advantages of securing loans from hard money lenders licensed PA?
When you get a loan from a hard money lender, you’re getting a loan product designed for your quick fix-and-flip scenario. Bank mortgages are designed for long term habitation. You’ll get approval for a hard money loan more quickly and get quicker access to the funds. There is the added benefit that quite often hard money lenders will go over your rehab plans with a fine-tooth comb and do an appraisal of the home’s projected ARV. To be honest, a lot of the homes rehabbers purchase would never qualify for a bank mortgage because of their poor condition, but that’s the whole point of doing a flip and hard money lenders understand this.
Not only that but when you work with an experienced and investing-savvy lender, you can benefit from their insight and ideas, which could perhaps help to make your rehab even more successful and profitable!
What does it take to be approved for a hard money loan? or two? or three?
Approval for a hard money loan is usually based more on the ARV and the soundness of the rehab plan. The experience of the rehabber/borrower and their ability to do the work factors into the approval more than their personal credit score or history. While you’re unlikely to get more than one house-related loan at a time from the bank, as you prove yourself to a hard money lender, you may qualify for a second or third hard money loan for new properties you’re lining up for rehabbing.
If you haven’t previously used a hard money loan in your real estate investment business, make this the next step in your investing. You’ll discover, as many investors do, that hard money loans are a great way to fund your fix-and-flip projects and build an investing business… and there are hard money lenders licensed PA ready to help your business succeed.