The Bank Said No, Now what are my options ?
Where to turn when a bank says no?
The focus on todays column is on hard money, an alternative to traditional lending avenues. I’m commonly asked what is hard money. When I answer this question, people seem to be amazed to find out what a true hard money lender is and the benefits it can provide to a borrower. First, I’ll define what a hard money loan is and then discuss some real cases when a hard money loan is appropriate.
What is a hard money loan?
A hard money loan in its purest sense is any loan secured by a “hard asset”. In our case the hard asset our loan is secured by is a first mortgage on either commercial or residential (investment properties only) properties. A hard money lender lends up to a certain loan to value based on the value of the real estate. In our case we lend up 80% off the current market value of the property. A hard money lender, like ourselves, is privately funded and therefore has flexibility to structure loans for a particular situation.
So why use a hard money lender?
There are many reasons to use a hard money lender, below are just a few of the top reasons we have seen. Fortunately with a hard money loan, as long as we can understand the situation and the borrower has an asset with ample equity we can structure a loan to fit their particular needs.
1. Need quick closing ?
A traditional loan takes considerable time to underwrite and fund (typical is almost 60 days on residential and 4-6 months for traditional commercial loans). Many borrowers need something done quicker. Insource can close and fund the deal typically in 5-10 days depending on the transaction
2. Credit/financials don’t fit traditional guidelines:
As a result of the past recession many borrowers’ financials and credit was impaired and they no longer qualify for traditional lending. Insource Funding can close loans regardless of credit.
3. Property doesn’t fit traditional guidelines:
Many times a property might not be performing to its potential (below market rents, etc…), property located in a rural location, etc… that prohibits a bank from funding a loan. Fortunately Insource funding works hard to fund transactions that don’t fit traditional underwriting guidelines for whatever reason.
We fund both commercial deals and residential (investment properties only), To start we need a one page application, details about the transaction and a letter of experience. We underwrite all of our deals in house and work hard to get your transaction funded quickly. I hope each of you benefited from this primer on hard money lending. If you have any questions feel free to shoot me an e-mail or give me a call and I’ll get them answered. We look forward to working with you on your next non-bankable transaction