Q: When are
private investor / hard money loans used?
A: The most common situations that a person
will require a private investor / hard money loan is as follows:
Recent Bankruptcy. Balloon payment on existing loan is due now.
Cannot verify income, tax returns, bank statements, etc. Need
emergency cash quickly. Odd or non-conforming types of properties,
such as mixed use, multiple units, apartments, land, etc.
Q: Why would a
person invest in a hard money loan?
A: Most private investors understand the real
estate market, real estate loans and mortgages and are looking for a
safe and secure investment with a return better than what they will
receive from the bank. Since this types of mortgages are secured by a
property with normally 30%- 50% equity, the investor is well protected
and receives the benefit of the higher interest rate return.
Q: Are most
private investors / hard money lenders trying to foreclose on your
home to get the property?
A: No. Private investors / hard money lenders
simply want a good return on their investment but they will protect
themselves from losing the investment by using the equity in the
property. This is a common misconception, private investors / hard
money lenders just want the payments made on time but if the borrower
is having difficulty they will insure that it will not be a long term
Q: Do I need to
provide all my documentation regarding income, bills, etc?
A: This is dependent from investor to investor
but typically you will only need to provide minimum documentation to
obtain the loan. Also these types of loans are a true no income
qualifier loan because you do not need to sign a 4506 or 8821 form.
Q: What if I am a
home buyer with damaged or poor credit with a low FICO score?
A: These types of loan are usually used by
individuals with past, recent, or current credit issues to rebuild
their credit and eventually refinance to a more traditional type loan.
FICO scores are no reviewed or required for this type of loan.
Q: As a Mortgage
Broker / Banker, can I obtain a private investor loan for my borrower
and still receive a commission?
A: Yes, in fact, most loans funded by private
investors where originally originated and packaged by a mortgage
broker or banker who earned a commission from a loan that they could
not previously close with traditional wholesale lenders and investors.