Do you need a mortgage lender or a hard money lender? What is the difference between these two? Can someone be both? The mortgage process is one of the trickiest parts of home buying so you want to be sure you are working in the right direction. Most applicants who apply for a hard money loan know they don’t qualify for, or even want a traditional mortgage.
This can happen because they need fast cash, or they don’t meet the necessary credit requirements. What happens if you qualify for both options? There are a number of benefits that come with getting a hard money loan even when you qualify for a traditional mortgage. These benefits are why so many people have started applying for the various types of hard money loans that exist. It is important to know what these benefits are before making a final decision either way.
How to Choose a Mortgage or Hard Money Lender
Fast Funding Approval With Customized Loans
One of the reasons that a lot of people are taking out private money loans is that the whole process of getting them is much faster than with a traditional mortgage. If you want your money as quickly as possible, a hard money loan could be your best option. Many people get the funds they need through these loans in under a week, whereas a traditional bank loan could take up to a month. When you are looking into hard money lenders, you will want to find out how quickly each one can disperse your funds.
Flexible Payments & Payoffs
Private lenders offer a lot more flexibility in making payments than most banks. These lenders create customized loan plans so that the borrower can be in the best position possible for repaying theirs. If you take out a traditional loan through a bank, you will be required to agree to the terms they set. With a private lender, however, you will be able to negotiate a repayment plan that works well for both parties involved. The more flexible your repayment plan is, the better your chances will be of paying off the money you borrow on time.
A vast majority of banks require applicants to have good credit for them to get approved. Another reason that hard loans have become such a popular borrowing option is that private lenders don’t really care about applicants’ credit scores. If you have something like a foreclosure or bankruptcy on your credit report though, it could be a problem. Those who have bad credit and cannot get a traditional mortgage through a bank should at least consider this option.
No Prepayment Penalties For Customized Hard Money Loans
Those who take out a traditional mortgage through a bank will face some pretty hefty penalties if they pay off their loan early. You won’t have to worry about being charged anything extra if you pay back a hard moan loan before the due date. Those who run into some extra money and decide to pay off their hard money loan early will not have to worry about incurring any penalties or fees at all.
Things to Consider When Making Your Financing Decision
While it is true that there are a lot of benefits associated with taking out a hard money loan over a traditional mortgage, there are some drawbacks. You will almost certainly end up paying a higher interest rate and other fees. Case in point, most companies in our featured database of hard money lenders have posted terms that are much higher than traditional banks and mortgage companies.
The rate that you pay will depend on the type of loan you get, but it will likely be higher than a loan you get from a bank. It is important that you consider your own financial situation before choosing one option over the other. Hard money loans have a lot to offer for investors, but they aren’t right for everyone.
For more information on the home buying process and to find property in Snohomish, contact us!
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