An Overview of Residential Hard Money Loans

Residential Hard Money Loans

Unless you’re planning on buying a house with cash, you’ll need to finance the purchase with a home loan. Though conventional mortgages are the most common loan type homebuyers use, they’re not the only option at your disposal. In fact, hard money loans are an affordable and flexible alternative that many homebuyers can qualify for quickly. Before you start looking for the best hard money lenders in California, you need to understand how these loans work. Here’s what you need to know.

The Loans Aren’t Available at Banks

When you apply for a conventional mortgage, you can apply at your preferred bank. Hard money loans, on the other hand, come from specialized lenders, not large banks. If you decide to apply for this type of financing, you’ll have to look for dedicated hard money real estate lenders to start shopping for the best loan for your property purchase.

How You Can Use a Hard Money Loan

You can use hard money loans to help you buy just about any type of residential property on the market. If you’re looking for your first home, want to fix and flip a property or want to invest in a multi-family home as a landlord, hard money loans will make that possible. These loans are much easier to qualify for in the first place. If you have bad credit or don’t have a ton of money saved for a down payment, you’ll likely still qualify for a hard money loan. The property you’re buying guarantees the loan meaning lenders care more about the property’s value than they do about your credit history.

The Terms Vary From Lender To Lender

You should always shop around when looking for residential bridge loan lenders, just like you would for a conventional mortgage. Get quotes from at least three lenders and compare the repayment terms, interest rates and the amount they’re willing to lend you before you make a decision. Try to choose the lender that offers them the largest amount of money at the most affordable interest rate.

Keep in mind that the repayment terms for hard money loans are often shorter than those of a conventional mortgage. The best hard money lenders in Californiaoffer repayment terms ranging from 1 to 5 years. The length of your loan term determines how much money you repay each month. Longer terms have smaller monthly payment amounts while shorter terms will force you to pay more each month. That said, you’ll end up saving on interest payments over the life of the loan.

When a Hard Money Loan Is the Best Option

Though hard money loans are easy to qualify for, they’re not the right loan for every situation. Before you apply, think about how you plan on using the property. Are you looking to fix it up and sell it at a profit in a few months? Are you buying the house for your family, but been unable to qualify for a conventional mortgage? If so, a hard money loan is a great option.

Hard money loans are a great alternative to conventional mortgages. If you’re interested in applying, take your time, shop around and choose the lender that you’re most confident in.

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