Hard money loans are what you need if you are searching for financial assistance to get your dream home in the fastest way possible. It’s all about getting the financing in time, whether it be a month, some weeks, or even just a few days.

Mortgage Capital offers some of the best home mortgage capital loan packages you can get your hands on. We make the whole process easy and simple as long as you provide all the needed requirements.

Hard Money Mortgage Lender Loan Requirements

Applying for a hard money loan from a private mortgage lender might be challenging for some. Well, that may be the case if you apply for one but lack certain requirements. Hence, you must prepare ahead of time so you save yourself the hassle.

Here is a list of the loan requirements needed when applying for a hard money mortgage lender loan.

Downpayment

The total hard money loan amount depends on the full estimated value of the borrower’s project once completed.

What usually happens with situations involving real estate development and renovation projects is that the property value at the time of purchase isn’t enough to cover the lender’s losses if they default in payment.

An example of this is if the mortgage firm lends $500,000 to a borrower who purchases a $400,000 property, and worst case scenario, they default, the lender would incur $100,000 or even more in losses.

Hence, mortgage firms that offer hard money loans require a downpayment of at least 10% of the total property value. This, however, can vary depending on your financial portfolio.

Liquid reserves

Liquidity reserves are another important factor to consider for mortgage lenders. Liquidity is the capability of easily converting an asset into cash in the fastest way possible. The more liquid your assets are, the higher your chances of getting an approved home mortgage loan.

Money deposited and saved in a bank account is a highly liquid asset. This is because the account holder can easily transfer the money to another account or withdraw it in case they need to pay for the monthly mortgage.

Meanwhile, stocks and real estate properties are less liquid because they are harder to convert into cash. Converting them into cash requires you to spend more on brokers and agents.

After-repair value

After-repair value or ARV is the amount that hard money lenders compare to the as-is value when assessing a borrower’s financial background. You get a better chance of being approved for a hard money loan if there is a greater difference between your ARV and as-is value.

Loan limits

Loan limits vary from lender to lender. But the usual ARV rate is around 70%. If the property valuation is $1 million, the borrower can lend a maximum of $700,000 to finance the project.

This is considered enough for the borrower to finish their project, in this case, their home.

Investment history

Investment history is another important requirement when applying for a hard money lender loan. You are still eligible to apply for a hard money loan even if it’s your first time purchasing a house as long as you prepare a well-laid-out plan that assures the completion of the project.

Mortgage lenders want to get the assurance that you are going to spend the loaned amount on your home project and have it completed in the stipulated time.

This includes house blueprints, pitch deck proposals for build-and-sell businesses, or even a portfolio of previously completed home renovation projects, no matter how small they are.

How Much Downpayment Does a Hard Money Lender Want?

Most hard money lenders require specific LTV ratios to be met which are usually based on the property’s purchase value. The rehab costs are also added to this and the remaining amount is calculated as the downpayment.

Meanwhile, other hard money mortgage lenders require a 10% to 20% downpayment for their purchased property.

The more credible your financial background and portfolio are, the smaller the downpayment required. There are also times when you require a higher downpayment because you need the funds fast. The faster the fund turnaround time, the higher the downpayment required.

Why Use a Hard Money Lender?

Hard money lenders are the best choice if you need money urgently to finance your home project.

These loans have shorter terms compared to regular ones. This benefits both ways as the lender lends their money at a shorter period reducing their risk exposure time.

On the other hand, the borrower pays less interest rate because it wouldn’t take long for them to repay the loan.

How Much Do Hard Money Lenders Charge?

Hard money loan rates vary but the average interest rate hovers around 10% to 18%. This is higher than other home mortgage loan types because processing is faster and the loan duration is shorter, hence, you pay less for interest.

Origination fees and points are also added to these rates which is why they become higher. Origination fees range from 2% to 6%.

Where Can I Find a Hard Money Lender?

There are many hard money lenders offering home mortgage loans. It’s easy to pick one, only to regret it afterwards because of slow processing, high interest rates, and complicated requirements.

You don’t have to worry about any of these when you are with Mortgage Capital.

Mortgage Capital offers the best hard money home mortgage loans you can lay your hands on, thanks to our competitive rates, fast processing, and expert assessment so you get the loan package you need and deserve to achieve and get your dream home.

What does LTC mean with Hard Money Lenders?

LTC is an abbreviation for loan-to-cost ratio. This compared the project financing value with the project’s actual building cost. LTC is a metric commonly used in real estate property construction. Lenders are at higher risk if the LTC is higher.

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