Hard Money Loans Compared To Standard Programs
UPDATED On November 25th, 2018
Buyers with bad credit and little or no income docs can use hard money financing to fund the purchase of real property.
- Hard money programs are frequently used by investment property buyers as a short-term bridge option
- Investors get access to closing funds quickly so they can complete the escrow process in less than 2 weeks
- Hard money loans offer 2 strong benefits: fast closings and less paperwork
Hard Money Is A Valuable Resource
Investors frequently run into time constraint barriers where they need to close on a unit quickly to avoid losing the deal. When this happens it’s usually best for them to utilize hard money financing to close the deal quickly with limited paperwork and bureaucracy.
Standard mortgage programs may take 30-60 days to close which can kill a deal before it even begins. In this case, hard money is usually the answer.
- Great for real estate investors
- Typically used as a short-term loan to acquire investment property
- Excellent for buying distressed property
- Much faster turnaround time for processing and underwriting compared to most standard mortgage programs backed by the government or picky secondary market investors
- Rates and fees are high but these loans are not held long-term; they are typically refinanced into better loan instruments after 6 months
Quicker Closings And Less Paperwork
Most investors would love to get the low rates and fees associated with standard mortgage programs but they typically can’t use that type of financing due to the slow closing process and/or the large amount of paperwork required for approval. The paperwork and slow turnaround time can kill a deal quickly and its for those reasons that real estate investors frequently tap into hard money loan programs.
Benefits of hard money financing:
- Close on loan and acquire investment property in 20 or fewer days
- Less paperwork required by underwriting
- Less steps involved in the loan process and less stress
- Quick and easy approval
Hard Money Programs Compared To Standard Mortgages
Compared to standard mortgages, hard money loans have a few differences, such as:
- Standard mortgage applications have numerous pages with invasive questions
- Standard lenders take 5+ business days to review applications for approval
- Standard lenders require a lot of documents prior to approving an application.
- Examples of required documents include:
- All pages & schedules of Federal Income Tax Returns
- P&L statement
- Fully executed personal financial statement
- Business license
- Letter from CPA or Accountant
- Examples of required documents include:
- In many cases the paperwork process and lengthy turnaround time associated with standard mortgage programs acts as a major roadblock to acquiring the property and the investor ultimately loses the deal.
- When investors utilize hard money financing instead of standard mortgage programs t hey can close on the deal in less than three weeks.
- Most of the time a hard money lender can approve an application in less than 3 days.
- Hard money underwriting uses a common sense approach and is much more flexible than traditional government or conventional programs.
- When an investment property buyer needs to close quickly a hard money loan program is almost always the best available option.
- Property sellers typically like hard money financing and accept those offers without hesitation because they know the sale will close quickly.
- In general, there are a lot less hoops and obstacles associated with hard money loans. There’s less bureaucracy and fewer snags in the approval process.
Obstacles Involved With Standard Mortgage Programs
Traditional mortgage lenders operate by a strict set of government-imposed guidelines and require way more documentation compared to hard money lenders.
- Some times traditional mortgages go through underwriting 2 or 3 times and the underwriter continuously asks for more documentation.
- Last-minute conditions and approval stipulations associated with standard mortgage programs can kill a deal in the 11th hour
- Standard programs have lower rates and fees but they have a lot of obstacles and roadblocks.
- Standard loan options are typically best suited as end-loans when the real estate investor already owns the investment property and simply wants a lower rate
- Hard money loan programs are best suited for short-term fix and flip deals or no doc buy and hold rental properties
Hard Money Loans Michigan
Michigan has some of the best value-buy properties in the entire nation and remains a lucrative area for real estate investors.
- Many single and multi-family homes in Michigan are 50+ years old and need renovation
- There are a lot of vacant properties in Michigan that offer opportunities for acquisition and rehabilitation
- For a long time investors did not have access to quality hard money financing programs but there are now numerous options in the lending market.
- Property flippers and rental property buyers in Michigan can now purchase investment deals in less than two weeks.
- Investment property buyers can acquire and flip distressed properties or add rental units to their portfolio without providing tons of documentation.
- Hard Money Loans are available in Michigan, Colorado, Florida, Texas, and other states.
Flippers and rental property buyers who need access to hard money loan programs can call or text the Collin Hoyer Mortgage Team at 616-402-6195.