Avatar's Blog
» Borrowers Tap Mortgages of Last Resort
Now that Sub-prime has basically disappeared, the hard money-money lenders are pretty much the only source of capital for many people.
Once a thought of a last resort strapped borrowers, hard money loans which have different lending standards than traditional mortgages, are attracting a larger, more affluent group of consumers.
Unlike a traditional mortgage, which is largely defined by credit scores and the borrower's ability to repay, hard money loans are based almost entirely on the value of the underlying asset. That means a borrower's income and credit score aren't nearly as important as they otherwise might be.
Borrowers needing a short term loan or a 'bridge' loan are required to have substantial equity in their collateral - either their home, investment property or commercial property - of 30-40%.
Consumers who need quick access to financing to close on a property in as little as 2 weeks or less are good candidates for hard money.
Consumers who do not meet conventional bank financing but have substanital equity in their property are good candidates for hard money.
Be prepared to pay higher interest rates and fees and you will want to refinance as soon as you can into a traditional mortgage. Once that is accomplished there should be no reason for another hard money loan.
