Trulia San J…, Home Buyer in San Jose, CA

Are Hard Money Lenders ever a desirable way to secure financing for buying a home?

Asked by Trulia San Jose, San Jose, CA Wed Jan 30, 2013

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Ruth & Perry Mistry’s answer
Hi Trulia

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.

Best regards
Web Reference:
1 vote Thank Flag Link Wed Feb 13, 2013
Most hard money lenders will only lend up to 60% or 70% of the purchase price and will charge 3 to 4 points at close of escrow with an anual interest rate of 10%to 12%. This is only good if you are trying to close escrow on a house real quick and you have the 30 to 40% to put down. It is very expensive
1 vote Thank Flag Link Wed Jan 30, 2013
Yes for the right situations in flipping homes today. It is a short time loan as the rates are from 8.99% and up and from 35% down and up. They have their purpose and fill a gap in many cases.

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.
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1 vote Thank Flag Link Mon Feb 11, 2013
Not if you intend on lioving there. Had money is used bvy investor to buy, fix and sell a home. It is high interest and short term such a 6 mo to a year only. if you do not pay it off or refinance within a year it gets very costly. Stick with a local and trusted loan officer who can prequailify you
1 vote Thank Flag Link Thu Jan 31, 2013
Excellent responses.
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
1 vote Thank Flag Link Thu Jan 31, 2013
Thank you for your question:As Tina Lam, Grace Morioka and Frank Herman Pointed out hard money is very expensive.

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.
1 vote Thank Flag Link Thu Jan 31, 2013
In today's market environment around San Jose, a hard money loan is one viable option for buyers to stay competitive with all the cash buyers. It's not cheap, but it gets the deal done. So, if you can save 5-10% by buying earlier, then hard money is a desirable way to buy.

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.
Web Reference:
1 vote Thank Flag Link Thu Jan 31, 2013
To be frank, hard money lenders are great for a very short term solution. But neither the buyer nor the lender benefits from a long-term loan at extra high interest rates, so it is not a 30 year mortgage solution by any means.
1 vote Thank Flag Link Thu Jan 31, 2013
Only use hard money for bridge financing. Its very very expensive and the terms are often undesirable for the borrower. One strategy we tell our clients is to get pre-approved with out stated income program, its fast and easy, and enter into a short escrow to ensure you secure the property.
0 votes Thank Flag Link Thu Apr 24, 2014
Really depends but it should be your last option.
0 votes Thank Flag Link Wed Feb 20, 2013
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