Private Money Lenders, Its not as scary as it sounds | Insource Funding.
Updated: Mar 5, 2019
What is a hard money lender?
First, it’s important to understand what a hard money loan is: It’s simply a short-term loan secured by real estate. Back to the question of who and what a hard money/ Private lenders : “It’s synonymous with a private investor, A lender could be an individual, a group of investors, or a licensed mortgage broker who uses his own funds. This differs from a bank that uses money from its depositors.”
Benefits of a Private Lender:
Why would any home buyer opt for a hard money / Private loan from a hard money lender instead of getting their mortgage the traditional way from a bank? Because hard money loans are generally less of a hassle. The flip side? Hard money loan rates are much higher, and you borrow the money for only a short period of time. Hard money lending is especially popular for the following people:
If a house in disrepair comes on the market and it looks like it could be fixed and flipped in several months, most people prefer not to go through the hassle of taking out a 15-year loan on the property, and Insourcefunding.net wil also finance the rehab.
Many contractors use hard money loans to buy a lot, build on it, then sell the new structure and pay off the loan quickly.
On occasion, a real estate investor will come across a killer deal on a property that needs to be snapped up pronto. If the investor doesn’t have the money on hand, a loan can be fast-tracked by a hard loan lender, who is, in effect, a real estate investor as well.
People with credit issues:
People who have cash on hand for a down payment but have been rejected by a bank for a conventional loan—or have had a foreclosure, default, or other red flag on their recent credit report, but have some cash on hand, can use hard money loans to buy a property that would be unavailable to them otherwise
So let’s say you lost your job several years ago and your house went into foreclosure. Since then, you’ve found a great position and are happily employed. You've also found a killer deal on the perfect house, but there's a problem: Few banks will grant you a mortgage with a foreclosure on your record.
Chances are you can find a hard money lender that will give you the opportunity to buy that home before it slips away. You can then refinance with a traditional mortgage once time has passed and your credit score improves.
“The higher interest rates may seem scary at first, but the benefits of getting a loan funded quickly and being able to obtain financing when all the banks have said 'No' will far outweigh the extra cost,” says Hensel. The closest thing banks have to a hard money loan is a bridge loan, but qualification for one may be more difficult.