Hard Money Loan FAQs: What You Need to Know
Hard money loans are popular among real estate investors looking for fast funding and flexible qualification requirements. If you’re considering using a hard money lender, you likely have questions about the process. In this article, we answer the most frequently asked questions to help you decide if a hard money loan is right for your next project.
What credit score is needed?
One of the main benefits of hard money loans is relaxed credit requirements. Most hard money lenders focus primarily on the value of the property being used as collateral, not your credit score. While some lenders may check your credit, there is typically no minimum credit score requirement. Even borrowers with poor or limited credit histories can often qualify.
How fast can you close?
Speed is a key advantage of hard money loans. Loans can close in as little as 5 to 10 days after you submit your application, sometimes even faster if all documentation is in order. Unlike traditional mortgage lenders, hard money lenders do not require lengthy underwriting processes or extensive paperwork, making them ideal for time-sensitive deals.
What is LTV?
LTV stands for Loan-to-Value ratio. It’s a percentage that compares the amount of the loan to the value of the property. For example, if you’re buying a property worth $200,000 and borrowing $140,000, your LTV is 70%. Most hard money lenders offer loans with a maximum LTV of 65% to 75%, depending on the property type and condition.
Do I need income?
Income verification is typically not required with a hard money loan. Most lenders do not verify employment or require tax returns. Instead, approval is based on the property’s value and your plan for the project. This makes hard money loans a great solution for self-employed borrowers, investors, or anyone with unconventional income situations.
Can I buy in an LLC?
Yes, most hard money lenders allow you to purchase or refinance investment properties in the name of a legal entity such as an LLC or corporation. This is especially beneficial for real estate investors seeking liability protection or those building a portfolio under a business structure. Just be prepared to provide your LLC documents and operating agreements during the process.
What are rates?
Interest rates for hard money loans are generally higher than conventional loans, reflecting the increased risk and flexible approval process. Typical rates range from 8% to 12%, with points (upfront fees) of 1 to 3 percent of the loan amount. The exact rate depends on factors like property type, loan amount, LTV, and your experience as an investor.
Ready to Get Started?
If you have more questions or want to see what you qualify for, contact us today for a free consultation. Our lending experts are ready to help you secure fast funding for your next real estate investment!