About Texas Hard Money Loans
Per Bruce Myles, owner and founder of Proactive Commercial Lending Group, LLC,” There are many types of loans consumers, investors, and businesses can secure, from a variety of lenders. Most consumers are familiar with traditional real estate loans, or, mortgages. Of which, the most well-known are conventional, FHA, and VA.
Of course, there are other kinds of real property loans, some of which are more suitable for real estate investors, rather than ordinary single family residence borrowers. One such example is a hard money loan.
What is a hard money loan?
A hard money loan is backed by collateral and is a secured debt instrument — it is not an unsecured loan product. The funds made available are supplied by private investors, or a fund, and is secured by a parcel of real property. Generally, this is an improved property, meaning, it has a structure and equipped with utilities infrastructure. Unlike traditional mortgage notes, hard money loans are not offered by banks and credit unions.
Does the borrower need good credit for a hard money loan?
In general, because a hard money loan is secured by real property, or, a valued asset, approval isn’t based on a borrower’s credit score. However, a credit file review will likely be conducted to check for such things as: foreclosures, bankruptcies, and outstanding and/or bad debts. Since the loan is collateral-based, a borrower’s credit score is less important than the value of the collateral asset.
What is the typical loan-to-value rate?
The loan-to-value rate will differ, of course, lender by lender, but, in general, a hard money LTV is up-to 70 percent. This is usually tied to the market value of a repaired, usable property pledged as collateral. One attractive feature to property investors is most lenders offer what’s known as a “draw request,” to borrowers to make necessary repairs.
How long is the term of a hard money loan?
Unlike traditional mortgage debt instrument products, which have terms ranging from 10, to 15, to 30 years, a hard money loan is a short-term product. Generally, hard money loans carry terms between 3 months and 12 months, but, might be extended.
Are there costs associated with a hard money loan?
Just like traditional mortgages, hard money loans do have costs, which typically include, but are not limited to: appraisal, insurance, and title search and policy. In addition, there are closing costs to pay. There might be other costs associated with hard money loans, depending on the borrower, the collateral, and, the term length.
Is a down payment required for a hard money loan?
Typically, a down payment is required to secure a hard money loan. This is required by lenders to ensure borrowers “have skin in the game.” For information about Texas Hard Money Loans please contact us