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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Frank Herman, , San Jose, CA
Wed Jan 30, 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
Donald D. He…, Mortgage Broker Or Lender, Oceanside, CA
Fri Feb 17, 2017
Hard money loans can be an excellent way to secure a home if the buyer currently has poor credit or issues on their record preventing them from obtaining a bank loan. Hard money loans are only short term financing tools that give the buyer time to repair credit or wait until they can qualify for a conventional loan again.…
3 votes
Ruth and Per…, Agent, Los Gatos, CA
Wed Feb 13, 2013
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
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1 vote
Scott Godzyk, Agent, Manchester, NH
Thu Jan 31, 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
Annette Law…, Agent, Palm Harbor, FL
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
charles butt…, Agent, san jose, CA
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
Tina Lam, Agent, San Jose, CA
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.
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1 vote
Grace Hanamo…, Agent, Cupertino, CA
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
Finance1onli…, , Los Angeles, CA
Thu Apr 24, 2014
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
Charles Lee, , 90069
Wed Feb 20, 2013
Really depends but it should be your last option.
0 votes
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