Hard Money Real Estate Mortgage Loans for Investing in Foreclosures and Auction Properties
Real estate values have dropped drastically and some borrowers now owe more than their home is worth! They are walking away...and foreclosures are at an all-time high.
Many people obtained low-interest adjustable-rate mortgages (ARM) a few years ago and now those ARM's are re-setting to much higher interest rates, increasing homeowners' monthly payments;sometimes to levels they can no longer afford to pay.
These are great opportunities to snap up homes on the cheap, but you will need fast money to buy these properties. This is where "hard money" loans come in. They require no income or credit verification. The loan is made based solely upon Loan-To-Value ratio of the property (LTV).
Hard money lenders generally will lend up to 75% LTV. That is 75% of the appraised value of a property. So if you are shopping for wholesale bargains to "flip" these lenders will allow you to purchase the property and obtain some extra cash to do necessary improvements to the property. In Michigan, hard money loans are made only up to 50% LTV due to the especially difficult economic climate in that state.
Hard money loans can be obtained quickly, usually in a week or two. This is important because many "bargain" properties are going to be obtained at auction. Auctions usually require the purchaser to make a non-refundable deposit of a percentage of the auction price when they win the bid. You will then have 30 to 45 days to pay for the property by obtaining a mortgage loan. Conventional mortgages can sometimes drag out past 30 or 45 days before closing, and this would cause a buyer to forfeit his deposit on the auctioned property! Not a good thing, obviously.
Unless you are a wealthy investor, hard money loans are the way to go for most buyers. Find a good mortgage broker to work with. Mortgage brokers act as a middleman between borrower/buyer and a multitude of different lenders they have established relationships with. They charge fees as "points" at closing of the loan. A point = 1% of the loan amount. Often these closing costs can be wrapped up into the new loan balance. Your only out-of-pocket cost will be to obtain a current property appraisal.
Most hard money loans are made by private investors, not banks, so using a good mortgage broker is really the only way to go. They will be your partner in your real estate investing for years down the road.
James Hussher is a mortgage loan officer for a national mortgage brokerage, licensed in all 50 states. Contact James at http://swifthussherrealestate.com to check rate, programs and even apply online!
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