How to Get Quick Hard Money Loans

A hard money loan may be a great option for your situation. These loans use real estate as collateral, and they are usually funded by private investors (or a group of private investors), rather than a traditional financial institution. They also typically have lower credit requirements and better approval odds than other types of loans. The funding is generally very fast, sometimes within 5-10 days or so, and cash-in-hand can be more appealing to sellers when you're making an offer on real estate. However, these loans also typically have higher interest rates, and the repayment terms can be much shorter than a traditional loan, such as a mortgage. Still, when you need money quickly for your next investment, a hard money loan is a great option. Here's what you need to know to secure this type of financing.

Real Estate Property

Most hard money loans are only available for certain types of properties. Owner-occupied residential properties are generally not fundable due to laws and regulations that require extensive paperwork. However, most investors will fund commercial properties, even if they are owner-occupied. Raw land may also be considered, as long as development plans meet the lender's requirements.

The location of the property may also be a consideration. Some lenders only fund properties within certain geographic areas, while others are much less strict and will fund properties in nearly every part of the country.

Documentation

You may be happy to hear that most hard money loans require less documentation than traditional loans. You'll usually need the following:

• An application: This may also be called a 1003 for residential properties. Commercial properties' forms may differ from one lender to the next.
  
• A personal guarantee: A lender may not require this, but it is generally an industry standard.
  
• Financial documents: These often include pay stubs, tax returns, bank statements and information on any other capital you may have.
  
• An appraisal: Most lenders require an appraisal, though the appraiser is usually chosen by the lender.
  
• A title commitment: Lenders want to know how you plan to use the property in the future.
  
• Insurance: You'll need documentation of a commitment from an insurance agency.
  
• An inspection: Some lenders require a property inspection, and they usually choose a third party to perform it.
  
• Other documents: Lenders may require any number of additional documents, such as photos of the property, supplemental personal or financial information, more information about your plans for the financing and so on.
  

The Process

The funding process is generally quite fast for a hard money loan. Once you've chosen a lender, you'll usually complete an initial application with basic information about the loan, yourself and the property. After a quick review, the lender will either reject the loan or move on to the next steps. These usually include an appraisal and inspection of the property, as well as additional documentation. Once the loan is processed, the funds are transferred. This usually takes just a few days.

While this may seem like a lot of information, hard money loans are actually much simpler and faster than traditional real estate financing. While many lenders do have basic credit requirements, these are considered less important than other aspects of the agreement, such as the loan-to-value ratio on the property and the collateral plans of the borrower. While there's no approval guarantee with any hard money lender, your chances are much higher if you do your research and ask questions along the way.