Yes hard money lenders are a viable option when one deems that the market is
going to continue to rise more than 10-15% a year or when one wants to buy
and flip a property.
It is being pursued by Investors.
There are Stated Income Loans for the self employed borrowers or Foreign Nationals with 30% down and minimum 700 fico scores. There are FHA loans from fico scores between 500-579 for 10% down up to $729,750. Then if you have a minimum 580 fico score, you may qualify for standard 3.5% down or as low as half percent down payment assistance programs up to $729,950 with a minimum 600 fico score to qualify. Conventional financing offers minimum 620 fico score with 5% down and NO Mortgage insurance (Lender paid MI) up to 417k and minimum 660 fico with 25% down and minimum 700 fico with 10% down up to $625,500. If you have a minimum 700 fico score, you may consider 3% down conventional financing up to the 417k.
Your choices in Jumbo conventional loans are a minimum 700 fico score with 20% down up to 2 million. You may also consider Stated Income Loans up to 2 million as well. Here are various loan program links to study and consider.
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
ALL Loan Programs Available
20+ Years Experience
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The knowledgeable, able and experienced buyer can use hard money loans to their benefit.
It is when this option is misapplied that real trouble surfaces.
Just like the zero interest loans, in their inception, were for builders in need of short term money, was misapplied for traditional home purchases the wheels on the wagon started to wobble.
One must think really, really hard before choosing an option that can raise your costs by 30%. That is expensive. Proceed with care. Hard money IS a solution for specific and real problems. This would never apply to a home buyer intending to reside in the home who does not have the guarantee of a financial windfall. (are the wheels wobbling?)
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
In my opinion hard money has it's place for sophisticated investors who are purchasing Real Estate for investment purposes and can justify the high cost of the Hard Money loan because the real estate purchased will produce a return high enough to justify the cost of the hard money loan.
As Grace Morioka pointed out, hard money is a short term solution for the purchase of Real Estate by sophisticated investors.
I would not recommend hard money for an unsophisticated homeowner or investor.
Several of my clients have done so. Of course, they're experienced and already know the process. So if it's the first time, buyers should definitely seek the advice of a Realtor knowledgeable about hard money lending.