Have you considered hard money loans? These can be a great way to put the necessary money behind an investment in real estate. If you can’t qualify for a more traditional bank loan or a more conventional means of financing, hard money loans can be a great way to meet the gap. To qualify for a hard money loan, you first need to understand that the property in question becomes collateral for the loan. You need to identify the right property with the right value in order to secure an approval as part of the process. You also cannot neglect your long term financial planning, because a hard money loan is not a permanent solution. It is, instead, short-term financing. Make sure you have all the necessary and relevant documents at hand when you initiate the application process, and do your homework before hand, as nothing takes the place of due diligence both before and during the application process for hard money loans. New Jersey is just one of the locations that Infiniti Funding serves, and we would be happy to meet your needs.
According to Investopedia, hard money loans (New Jersey based or otherwise) are short term loans backed by the value of the property, not by the creditworthiness of the borrower. Since the property itself is used as the only protection against default by the borrower, hard money loans have lower loan-to-value (LTV) ratios than traditional loans. Hard money loans carry interest rates even higher than traditional subprime loans. Since traditional lenders, such as banks, do not make hard money loans, hard loan lenders are sometimes private individuals that see value in this type of potentially risky venture. Hard money loans are used in turnaround situations, short-term financing, and by borrowers with poor credit but substantial equity in their property that wish to stave off foreclosure.
According to Marc Ferguson of InvestFourMore, financing rental properties is one example of a use for hard money loans. New Jersey rental properties, then, could be one such application for Infiniti Funding’s hard money loans. “Hard money is used by many investors as a short-term solution to fund real estate deals. Hard money can be used to fund fix and flips or buy rental properties until long-term financing can be put in place. I fix and flip homes as well as invest in long-term rentals, but personally do not use hard money. When you use hard money it is usually more expensive than traditional financing and I have other short-term financing in place. Hard money is still a great option for many investors, but I will also discuss other short-term financing options. …Hard money is a type of financing used to finance properties for a very short-term like 6 months or a year. Hard money-lenders use much different terms than a traditional bank. The first thing you will notice when you finance with hard money lenders is they charge a very high interest rate. Most hard money-lenders are charging 14 to 16 percent and points for their money. …The advantage of a hard money-lender is they may loan the entire amount of money you will need to complete a deal. Most hard money-lenders base the amount of the loan on the after repaired value or ARV.”
Ferguson explains that the biggest problem, when it comes to private lenders, is finding the person to lend you the private money. “ There are many websites that claim to have private money lenders they can connect you with for a small fee,” he explains. “In my experience those websites take your money and connect you with a hard money-lender at best. A real private money-lender wants to lend their money to someone they know and trust. They don’t want to lend money to a complete stranger who may or may not be trustworthy and have a clue what they are doing. I am still trying to find a source for good private lenders, but I think I am limited to one option; people I know. I use private money now from my sister who wants a better return on her sons college money. She trusts me, knows I know how to make money and is willing to lender her money out at a very reasonable rate; 7% with no points. For her, this is a higher rate than she could get with a CD or other secured investment. For me it is cheaper than if I were to finance with hard money. …It is possible to buy a rental property with no money down using hard money. If you were to finance with hard money loan and finance repairs as well, you can refinance the hard money loan with no seasoning period according to Fannie guidelines. Fannie guidelines do not allow a cash out refinance without a seasoning period, but the home has a higher loan than the original purchase price, because the repairs were financed. You can get a long-term loan to replace the hard money loan without waiting a year like you would with a cash out refinance.”
According to The Truth About Mortgage, “Most hard money loans are structured as balloon payments due 1 to 2 years after the loan is issued. Some even offer flexible payments such as an interest-only option. …Be sure you have the money to make your monthly payments or the hard money loan will simply add to your financial woes. These types of loans are really offered as a lifeline, and should be treated as such. If you know you won’t have the money to make the payments, it might be in your best interest to sell the property before incurring greater amounts of debt. When looking for a hard money lender, prepare to search locally as many of these types of lenders like to see the property they are lending on in person. Nationwide hard money lenders are out there, but may offer more conservative terms than a local company. So if you have a vacation property in Hawaii, you’ll likely need to choose from the hard money lenders in Hawaii. As with any financial transaction, practice extreme caution when dealing with these types of companies, as fraud and predatory lending are rampant in these situations.”
According to Financial Web, “Hard money loans are an often-overlooked method of obtaining the money you need. Hard money lenders are also sometimes referred to as private lenders. These loans are overlooked because they are not part of the mainstream lending industry. They lend money, but they are not subject to the strict regulations that other lenders are. Here are a few things that you need to know about hard money loans. …Although it is not required that you be in a distressed situation to borrow money from a hard money lender, they commonly lend to those that are in distressed situations. Hard money lenders make a business out of lending to those that are facing foreclosure or some other financial problem. Hard money lenders will usually only loan with low loan-to-value ratios and therefore can protect themselves from foreclosure. If they have to take the property, they are confident that they can sell it for what they have invested. …The costs associated with this type of loan are steep. In fact, you will probably end up paying at least twice as much for this type of loan as you would a regular loan. Hard money lenders specialize in lending to those in distressed situations. Therefore, they realize that they can charge higher rates and people will pay them. Those that often use hard money loans typically do not have any other options in front of them. Therefore, they will agree to the high interest rates and fees that are charged. “
Sherrie Scott of Demand Media explains, “Hard money lenders provide capital to businesses and individuals for the purchase of real estate or to finance business development projects. Hard money loans are most commonly used for real estate transactions, such as rehabilitation projects or commercial developments. Lenders finance a sizable portion of these transactions and the loans are subject to strict terms and conditions. These types of lenders are usually available over the Internet rather than through traditional bank branches. Many private investors provide hard money loans as well. …Hard money lending practices often involve quick loan turnaround times and very strict terms. Consumers have access to large sums of capital within 24 hours in some cases. Lending practices are not regulated by government agencies; therefore, lenders have the ability to make up their own rules regarding who they lend to, how much they lend, and under what terms. Lenders usually provide loans to individuals who are considered high risk by traditional banking standards. Applicants usually have no verifiable income or financial statements. Some applicants have little or no credit history. Some of the investments hard money lenders provide loans for are high risk as well. For example, hard money lenders often provide financing for real estate that is under construction or severely distressed. The amount of risk accepted by hard money lenders is considerably high compared to soft-money or traditional banks.”
Randolph Saint-Leger, also of Demand Media, writes, “There are many hard money or private money lenders throughout the United States, so researching one near you is not a problem. The Internet directory Moolahlist.com lists lenders. Rather than settling on one or two lenders, create a list of lenders in your area. Use a lender familiar with the property values around the investment home. If you have a hard time locating a lender, contact a local mortgage broker who may have names of private money lenders. Having multiple sources of quick cash is a good idea in case of rejection. Obtain each lender’s borrowing criteria to compare notes before settling on one.”
According to banking and loan expert Justin Pritchard, “Most loans require proof that you can repay them. Usually, lenders are most interested in your credit and income. If you have a solid history of borrowing responsibly and the ability to repay loans, you’ll probably have no problem borrowing money. If you can’t qualify for traditional loans, hard money may be an option. Hard money is a loan that uses an asset (or collateral) to secure the loan. Instead of evaluating a loan’s risk based on your financial position, the lender makes sure that they can get their money back by selling your asset if you don’t repay as agreed. Hard money loans are generally short-term loans, lasting from one to five years. You wouldn’t want to keep them much longer than anyway, because interest rates for hard money are generally higher than they are for traditional loans. …Hard money has its place for certain borrowers who cannot get traditional funding when they need it. Because the lender is mostly focused on collateral (and less concerned with your financial position), hard money loans can be closed more quickly than traditional loans. They would rather not take possession of your property, but they don’t need to spend as much time going through a loan application with a fine toothed comb. You do not need great credit to get hard money, and your income is not as important as it might be with other loans. It may even be possible to get hard money without verifying credit or income information, but it’s rare. Lenders will be interested in your finances, but your collateral is the most important thing.”
Pritchard goes on to explain that hard money is not “perfect.” It is a simple enough prospect, but it is just one option. Still, it may be the only option for which you can qualify, which means it may well be the solution to your financial problem. Infiniti Funding is happy to serve all your needs for hard money loans. New Jersey investors should feel free to contact us immediately so we can discuss at greater length everything that you require.