Hard money lending is monetary tools offered by hard money lenders to investors who need a substantial amount of money in a short period of time. Hard money loans are, in some ways, the same as conventional commercial loans, but do not have a rigorous process like banks and other traditional financial institutions. These loans are based on the value of the asset or property offered as security. Hence, most hard money lenders are not concerned about the credit rating and monthly income of the borrower.
The main concern of hard money lenders falls on the property itself. The hard money lenders usually approve an amount of loan that is equal to 60 to 75 percent of the value of the property involved. A third party appraiser determines the value of the property pledged as collateral. The appraisal of the property is usually dated within six of the loan approval.
If you urgently need money and your bank denies your loan application, then a hard money loan is a great. Although getting this type of loan is easy, you need to prepare some important things in order to expedite the loan process a bit. Below are some important requirements that you should remember before applying for a hard money loan.
The executive summary
The executive summary is very important when a borrower is applying for a hard money loan. The executive summary contains important information that will help convince the hard money lender why your asset makes a worthy investment. The borrower needs to complete a form that lists down all his experiences, most updated resume and colored pictures of the property involved.
The title report
The title report is another very important requirement when availing a hard money loan. It is a must that borrowers have a clean title record of their property. All hard money lenders always make sure that the current title of the property can appropriately be documented. The title report can be secured from local title companies. This report can be issued in a matter of one week, and the price varies from $500 to $2000.
The evidence of the insurance
Most hard money lenders require the borrowers to maintain the insurance on the property. Also, the lender will be the one to specify the amount that the borrower should be able to borrow. In situations where the borrower’s business is located in a commercial property, the lender will require additional coverage.
Hard money lending does not only cover existing properties. It also covers a property that is still under construction. This is referred as new construction loan.