How to get a hard money loan in Florida?

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If you need cash fast for investment purposes, hard cash loans might be your best bet. This is especially true if you can’t get a traditional loan because of bad credit or slow processing speeds. Most hard money lenders process their loans within weeks or even days.

For many Floridians, getting a hard money loan is an easy choice. Thanks to the many private lenders in and around the city. However, finding the best lender with lower interest rates and higher loan-to-value (LTV) ratios can be difficult.

Below, we’ve explored everything you need to know about getting a hard money loan in Florida. You will also learn how hard money loans work, hard money loan requirements, how to find a private lender, and all the rest.

What is a hard money loan?

Hard money loans are short-term bridge loans offered by private lenders, primarily to real estate investors. Borrowers use their real estate as collateral when obtaining hard money loans; therefore, both parties minimize the associated risks.

Most hard money loans have a repayment period of 1 to 3 years, while interest rates range from 8% to 15%. Rates are higher than traditional banks since private lenders do not check credit history, which is tantamount to taking on a higher risk.

Depending on the lenders, you may have to pay interest on the loan every month. Here, the principal amount has to be paid at the end of the repayment period. Some lenders charge fees for making payments sooner or later. Likewise, you will lose your property if you default on the loan.

Hard money lenders prefer to work with real estate investors because their business model suits them best. For example, a real estate investor can borrow a hard money loan to finance a property or make urgent renovations. They will only be required to pay interest on the loan until they sell the property (at a profit) and repay the loan in full.

Since the property is used as collateral for the loan, most private lenders have a lower LTV, typically 50% to 70%. This way they can minimize the risk, just in case you don’t repay the loan.

Hard Money Loan Requirements

Most property investors will go for hard money loans when the property they want to buy is in high demand and the seller wants instant cash. Or the property won’t pass the typical mortgage lender’s strict inspection. That’s not to say, however, that hard money lenders don’t require a home inspection.

Like any other business, private lenders hedge their risk by establishing certain requirements that borrowers must meet. These include:

  • Real estate experience. Private lenders prefer to work with seasoned real estate investors who understand the market. Some beginners pose a risk and may incur higher rates.
  • Overall financial strength. Real estate investors with an impressive investment portfolio and multiple sources of income are highly preferred. Indeed, they can find a way to repay the loan if the investment strategy does not go as planned.
  • Deposit. All private lenders will require you to make a 10-30% down payment on the property you wish to purchase. It also means having enough cash reserves to pay for closing costs and other associated costs.

More often than not, popular investors and repeat customers have an easier time accessing hard money loans because of their positive track record. As a new client, you still need to meet the above three requirements to get a hard money loan.

How to find a hard money lender

The private lending business has grown over the years and many savvy investors use these loans to secure great deals in the market. In Florida, hard money lenders are everywhere, but you can choose the best by sticking to the following tips:

  • Years of experience and reputation. The best lenders with the best rates are private lenders with many years of experience in the market.
  • Loan conditions. If the loan terms are too good to be true, chances are the lender isn’t legit and you could be scammed.
  • Costs. The best lenders won’t charge exorbitant upfront fees before processing loans, so you should always be on the lookout.
  • Customers’ opinion. Always refer to reputable review sites like Google to see what past customers are saying about the company.

Conclusion

Getting a hard money loan in Florida is relatively simple. You just need a property to act as collateral and ensure you meet the requirements mentioned above. You can also join a local group of real estate investors to learn more about hard money loans. This way you will know the best private lenders in the market and more about what you need to qualify for the loan.

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