There are a few key differences between hard money lenders and other types of real estate financing. While both types of financing are secured by real property, hard money loans are usually issued by private investors. The primary difference between these types of loans and other types of financing is the terms and conditions of the loan. In most cases, hard money loans are issued by private investors and companies, while other types of financing are offered by individuals. These terms are defined below.
A hard money loan is a faster way to borrow money, so the timeframe can be shorter. Many hard money lenders don’t require a credit history, so they can process your loan in a matter of days, rather than weeks. Also, a hard money loan is usually much more flexible than a conventional mortgage loan. Some hard money lenders are flexible, allowing you to choose the terms that best fit your situation. You can typically expect your loan to be structured on the property’s value, so you don’t have to worry about a credit history.
Because hard money lenders focus on equity, they are more lenient with borrowers’ credit scores. While a traditional lender will scrutinize a borrower’s history, hard money lenders are not concerned with bad credit. Whether you are planning to sell the property in a year or two, hard money lenders will look at the value of the property and its equity. This way, they can overlook any past problems that you may have.