Are you familiar with how things work with a no money down hard money lender? If you want one of the many 0-down financing options available to buy real estate property, then you may need cross-collateralization. In short, you either need to already own a property with your own money and sufficient equity, or you need one that’s free and clear in terms of ownership.
Example of No Money Down Hard Money Lenders Helping You Out
Hard money lender down payment options may be confusing for some borrowers. Consider this example: You’d like to buy a piece of real estate with no actual cash down for $250,000. However, you already own a different piece of real estate that is free and clear, meaning you aren’t making payments.
Assume the other property is worth $250,000, just like the one you want. This is a classic case of buying real estate property types without any cash down while using your previous property as the cross-collateral.
The cumulative value of both these properties is $500,000, which means the required funding costs $250,000. The loan-to-value ratio, or LTV, of this example would be 50%.
What Are 0 Down Hard Money Loans?
This type of financing with a no money down plan is a relatively short-term loan that is usually a year or less. The loan amount is determined by the value of the collateral real estate property.
No money down hard money lenders typically don’t worry about the borrower’s creditworthiness, short sales, or previous foreclosures. So long as the potential real estate investing deal looks right, zero-down hard money lenders will offer the funds you need. However, higher risk means higher fees, points, and interest rates, unlike a traditional mortgage.
How to Find No Money Down Hard Money Lenders
Finding hard money lenders with no money down is no minor accomplishment, considering how rare they are. If you plan to find lenders like this, you need to be aware that they face an exponential risk for putting up 100% of the total funds needed. If you don’t plan on putting up your own money, then expect lenders to look into your credit history and income stability.
EXAMPLE LOAN SCENARIOS
No Money Down Hard Money Lenders Options Have Advantages
Working with private money lenders who don’t require minimum money down has benefits over a traditional lender with a front-money requirement. First, you can take advantage of great deals when you don’t have cash reserves in your bank account to move forward. A typical property deposit might be 30% of the total deal.
Skipping the hard money down payment requirement makes it easier for flipping houses. Consider an investor who paid all cash for an Akron property but wants to fix and flip another real estate property in Cleveland. Flipping the Cleveland property without any cash down can happen using the Akron real estate property as their cross-collateral.
This investor was able to move quickly, which is crucial for real estate investing in a market where residential properties move fast. Of course, private loans aren’t restricted to just residential investments.
Also, you don’t have to use a hard cash loan to cover the entire real estate property. While a 30% charge might be common in many deals, what if you only have 15%? You can chip that in and only borrow what you need for the other 15% off your equity.
Hard Money Lenders No Down Payment
Most private lenders offering fix and flip loans require some sort of money down. Typically, this will be as much as 30% based on the purchase price. However, you can find private loans from a private lender without a money down requirement attached to the terms and conditions.
Can You Use Hard Money Loan for Down Payment?
Do hard money lenders require a down payment? You can use a private loan and the funds attached for the hard money loan down payment on a house flipping property you are interested in.
This makes it possible to secure properties and achieve financial freedom with your personal finance when the right opportunities present themselves. You can do this to close a sale and pay the purchase price before someone else moves in and takes over the deal.
MORE EXAMPLE LOAN SCENARIOS
Hard Money Is One Way to Invest in Property Without Much Cash
Real estate investments are effective ways to diversify your portfolio and make more money. Some house flippers don’t even look at this opportunity because they are afraid they can’t come up with the financial resources to cover the origination fees, closing costs, and rehab costs necessary to get started. However, there are many options you can look into:
Assume the Mortgage: You’ll need to meet minimum credit score requirements and legal qualifications to do this, assuming the seller’s mortgage can get around the minimum down requirement.
Crowdsourcing: In this process, multiple individuals all contribute their small investments into a piece of real estate. Each would then get a return equivalent to the ownership percentage that they originally accrued.
Lease With Buying Option: You might lease a residential real estate property initially to get around the minimum down problem but then purchase the land later on. Once the transaction is finalized, you might rent or lease the primary residence yourself to make it an investment real estate property.
Microlending: Microloans range from $1,000 up to $35,000. These terms can be useful in handling the initial costs that most real estate investors encounter.
Partner Investment: Bringing a partner on board means you have someone to split the starting costs with. You would also share the obligations for any ongoing mortgage or loan.
Private Loans: These are when you put up an asset as your collateral. An asset-based loan lets you obtain or even fix and flip properties without worrying about high income or good credit, which traditional financial institutions would require. Approval through hard money lenders (no money down) is not always assured, but the right level of collateral usually gets the job done.
Seller Financing: An agreement based on seller financing might give you more leeway in terms of monthly payments. The seller would provide the upfront cost but then gets paid back by the buyer over time. This gets around the money down requirement that is a hurdle to many deals.
Get Preapproved for Your No Down Payment Hard Money Loan
Get approved today by applying online now for no money down hard money loans.
Being pre-approved for your loan with no down payment makes it easier to handle potential real estate matters, including purchase and rehab costs, because you’ll know how much borrowing and spending capacity you have.
For flexible options that will allow you to acquire more properties, contact a lender today and see what they can do for you in terms of property interest rates, flexible minimum credit score requirements, short-term loans, and adjustable loan terms.