3 Things You Should Know About Hard Money Loans
Have you found it hard to get approved for a loan to purchase a house? Being that you are using the money to invest in a house, you might qualify by applying through a hard money lender. However, the process of obtaining the money will likely be a little different than when applying for other loan types. Below, you will learn more about hard money loans and what to expect if you apply for one.
1. You Must Have Collateral to Give
The most important thing that is considered when a hard money loan is processed is the type of collateral that you can give. You can actually use the house that you intend on buying as the collateral for your loan. There are other assets that can be used as collateral as well. The specific types of collateral that will be accepted depend on the specific loan company chosen. For instance, some hard loan lenders will accept valuable jewelry as collateral, while others might not. Vehicles are common assets that are accepted as collateral by loan companies.
2. Your Credit Score Might Not Matter
A good credit score is commonly required for home loans, but it might not matter when you apply for a hard money loan. Although it is up to the specific lender as to whether the credit score will be considered, the value of your collateral will be the most important thing. The value of your collateral will also be used to determine how much money you are approved for. It is possible that you will be able to get a loan that is equal to what the house costs that you are buying if you use it as collateral. Keep in mind that some lenders may not loan you an amount that is equal to the collateral.
3. Closing on the House Will Be Necessary
You will actually have to complete the closing process if you opt for using the house you are buying as collateral. The hard money lender will basically want to know that you will actually end up being the owner. Before you are given the loan money, it is likely that the lender will want evidence of that escrow services will be used during the buying process. Escrow services are important because it is an ideal way for making sure the deal does not go wrong and you don't end up losing the house.