Hard Money Lenders for First-Time Investors
Are you new to real estate investments? Are you unsure of where and how to get funding? If so, you are certainly not alone. Many novice real estate investors find it difficult to seek funding because they are unsure how to get started.
Although house flippers could seek traditional lenders for the funds they need, they are likely to get turned down simply because they don’t have much real estate investment experience. Thankfully, there are hard money lenders and private lenders for first-time investors to make it easier for house flippers to get approved.
How Do These Lenders Help Beginner Investors?
This type of private lender is an asset-based lender. These financers may be private companies specializing in hard money loans for beginners. Professionals like this are much less stringent in hard money lending requirements. Because of this leniency, they are a great option for beginner investors.
Getting help from a hard money lender for real estate investing means getting approval and funding within ten days instead of waiting for 45 days with a bank.
Why Should New Investors Consider Using These Loans?
When you need capital quickly, hard money loans for first-time flippers are essential. Many real estate investors learn that time is of the essence. If you don’t have the capital to complete the real estate transactions, someone else will purchase the investment property.
Most investors don’t have time to search for approval for a traditional mortgage through traditional banks. Working with the best hard money lenders for first-time investors will allow you to realize your potential and gain experience without as much stress.
As a new investor, you likely have not built up a lot of capital. Because lenders expect you to put up a down payment, it may be difficult to seek funding from traditional mortgage lenders.
You will find the best hard money lenders for new investors will be more lenient with their demands. You won’t have to jump through hoop after hoop only to be denied for your lending.
Top Ways to Use a Hard Money Lender
You have a couple of options for using a hard money loan as a new investor. As you get started, we recommend seeking the best hard money lenders for beginners for the following.
- Buying a property for flipping
- Refinancing a property
New properties include residential, commercial, and multi-family real estate. Although your capital is likely limited, it’s important to realize you will need anywhere from 25% to 40% of the purchase price, even with a hard money loan.
How to Get Approved for Hard Money Loans
Although a hard money lender is less stringent in their requirements, some requirements will need to be met. By meeting the following, you will likely get approved for hard money loans.
- Be prepared to put up some of your money for a down payment. The required amount will vary based on the purchase price and the project.
- Make sure the rental property deal is sound and will interest lenders.
- Ensure you are organized and prepared to present your real estate investing project professionally.
EXAMPLE LOAN SCENARIOS
Understanding Hard Money Loan Terms
Since you are unfamiliar with this type of funding, we want you to understand some terms you will encounter. Understanding the following will help you prepare for seeking funding for your first real estate project.
Loan-to-Value
A hard money loan is based on a specific percentage of a property’s current market value, often abbreviated as LTV. A hard money lender will lend you money based on what they expect the property to sell for once it is rehabbed.
Points
Private lenders will charge a certain percentage of the loan to help streamline the cost. This is a one-time fee that is often referred to as points. Most hard money lending companies will charge between 2 and 10% of the loan total.
Interest Rates
Interest rates are often higher for this type of loan than for conventional loans. Hard money interest rates will hover between 10 to 15%. You are paying more in interest because the private lenders take on a bigger risk when giving you a loan.
Down Payments
As we mentioned above, you need to have the capital for down payments. Lenders will consider you as more vested in a project when you put up your own cash. Ask the lender about their cash-down requirements.
How to Find the Right Lender
Once you’ve decided to pursue this funding, you must find the right financer to meet your needs, which may be challenging. You should ask the following questions when searching for first-time lending options.
- Are you a lender or a broker?
- Will you check my credit?
- Do you work with new real estate investors?
- How do you handle interest on the loan?
- What information do you need to provide me with pre-approval?
MORE EXAMPLE LOAN SCENARIOS
The Requirements Are Flexible
If you are looking for this type of funding, you need to know the requirements are never set in stone. Private granters offer greater flexibility. As you grow your relationship with a lender, they may offer you greater flexibility.
Those seeking a short-term loan with a solid exit plan are more likely to interest a lender and get approval.
Get Fast Pre-Approval
As a novice real estate investor, convincing a lender to take you seriously can be challenging. You haven’t built up a solid track record yet, so they may be leery of working with you.
We are here to help you get the funding you need and answer any questions you may have along the way. Get started right away and get the money you need. You will find when you work with our partners, they are committed to your success.