How Hard Money Lenders Work
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Posted On :
Jan-30-2012
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Article Word Count :
507
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Hard money lenders are lenders that will offer homeowners a mortgage when traditional lenders, such as banks, will not. Unlike private lenders, hard moneylenders are generally in the profession of lending money and are licensed as such for doing so in their province.
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Hard money lenders are lenders that will offer homeowners a mortgage when traditional lenders, such as banks, will not. Unlike private lenders, hard moneylenders are generally in the profession of lending money and are licensed as such for doing so in their province.
Because they are in the profession of lending money, hard moneylenders are usually held to the same standards and regulations as that of banks and other traditional lenders. When homeowners aren’t eligible for a conventional mortgage and are considering turning to a hard money lender, the first question they often ask is: how exactly do hard money lenders work?
Hard moneylenders typically specialize in real estate loans; that is, providing mortgages, second mortgages, and other real estate loans to home and business owners. They usually only offer loans with short terms and don’t come with the strict requirements that bank and other major lending institutions ask borrowers to meet.
One of those requirements is that hard moneylenders do not need borrowers to have a high credit score in order to be eligible for a loan. While banks will take a person’s credit score greatly into consideration when approving or rejecting a home loan, a hard money lender will ignore credit, mostly looking at equity. That equity is the equity a person holds in their home or rather, the percentage of the home that the owner actually owns or, how much they have paid on the principle of their mortgage.
Another time when a homeowner might need the services of a hard money lender is when they don’t have enough documentation in order to be approved for a traditional mortgage. Typically banks and other major lenders will need to have a homeowner’s income verified before they will approve a mortgage.
When the homeowner is self-employed, has mostly saved their tips from serving tables, or can’t verify their income for any other reason, often a hard money lender will step in and provide a loan when a traditional lender won’t.
If a hard money lender does not think there is enough equity in one property, they may still offer a hard money loan, but for a much smaller amount than if there were more equity. Hard money lenders do this when there is a “low loan-to-value ratio.” In order to still get a larger amount, sometimes real estate investors will put up the equity on another property as additional collateral on one hard money loan. This is known as cross-collateralization.
It’s true that it’s often easier for many homeowners and business owners to obtain a real estate with a hard money lender than with a traditional bank or lending institution. However, hard money lenders can also often be much more difficult to find, because they’re not as well-known as the banks. When you’re not eligible for a conventional mortgage, contacting a mortgage broker is your best bet to finding a hard money lender that can help you with your real estate loan.
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Article Source :
http://www.articleseen.com/Article_How Hard Money Lenders Work_141069.aspx
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Author Resource :
Bryan J is the author of this article. For more information about Private Mortgages and Private mortgage Lender please visit canadianmortgagesinc.ca.
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Keywords :
Private Mortgages, Private mortgage Lender,
Category :
Finance
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Finance
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