How Easy Is It to Get Hard Money for Real Estate?

Hard money is an enigma of sorts. A lot of people think they know everything there is to know about it when, in fact, their knowledge is quite limited. For example, there is a common misconception that hard money is easy to get. People tend to believe that hard money lenders are haphazardly throwing cash around in hopes that someone will pick it up, default, and then surrender their property in foreclosure. That is not it works.

Granted, hard money loans are easier to obtain than retail bank loans. But that’s only due to process. It is not due to carelessness by hard money lenders. It is not due to the predatory lending that hard money lenders are often falsely accused of. Hard money loans are somewhat easier to get because of the way they are structured and how lenders run their businesses.

A Different Set of Regulations

Among the many things that differentiate hard money from traditional lending are the regulations governing both. Hard money lenders are private lenders, not retail or commercial banks. Therefore, they do not operate under the same rules that apply to banks and credit unions.

Federal and state banking regulations force retail banks and credit unions to leave no stone unturned in their investigation of a potential borrower’s credit worthiness. Just one or two blemishes on a borrower’s record can affect their ability to borrow. As such, some types of traditional loans can be tough to come by if you don’t have stellar credit.

The rules governing hard money are different. Because hard money is asset-based, there is no requirement to verify credit worthiness. Private lenders are free to lend based on the value of assets offered as collateral. As long as the value is there, the chances of approval are pretty high.

Far Less Paperwork

Different regulations are not the only explanation for why hard money is easier to get. Another piece of the puzzle lies with paperwork. If you have ever applied for mortgage, you know that the paperwork demands can be cumbersome. Just when you think you’ve furnished the last piece of paperwork the mortgage lender requires, you get an email requesting more documents. It takes months to process all those documents, too.

Hard money lending is just the opposite. According to Salt Lake City, UT hard money lender Actium Partners, paperwork requirements for a typical loan are minimal. You are talking about the loan application itself and perhaps some documentation relating to your collateral. That’s about it.

Less paperwork means less time and effort being put into loan processing. It means borrowers not having to scramble to produce documents they have never even heard of before. The end result is an easier, more streamlined process that isn’t bogged down by reams a paperwork traveling back and forth.

Lenders Are Not Careless

The bottom line is that hard money lenders are not any more careless than retail banks and credit unions. They are not in the lending business to lose. They have no interest in becoming landlords. Hard moneylenders are essentially investors who make money by loaning out their own assets. It is not in their best interests to be careless with that money.

Yes, it is easier to get hard money compared to traditional financing. But it is not that much easier. More importantly, the fact that the process is easier doesn’t mean that hard money lenders will just hand cash to anyone who shows up at the door. Lenders are very particular about not lending to high-risk individuals whose actions could result in significant losses.

For more informative articles, check out the rest of our site!