Frequently Asked Questions

A hard money loan is a short-term, asset-based loan primarily used by real estate investors. It's secured by the property itself and is typically used for quick financing, such as for property flips or other investments. These loans have higher interest rates and are easier to obtain than traditional loans because they focus more on the property's value than the borrower's creditworthiness.

To qualify for a hard money loan, you need to focus on the value of the property, as these loans are secured by real estate rather than borrower credit. Expect to make a substantial down payment, typically 10% to 20% of the property's value. Having experience in real estate investing can be beneficial, and you'll need a clear exit strategy for repaying the loan. The property itself will serve as collateral for the loan.

Investors use hard money loans for their speed, flexibility, and property-focused criteria. These loans are processed quickly, allowing investors to act fast on time-sensitive opportunities. They offer more lenient terms and less stringent qualification requirements, making them ideal for those with non-traditional financial profiles. Because hard money loans are based on the property's value rather than the borrower's credit, they are well-suited for fix-and-flip projects or distressed properties. Additionally, they serve as effective bridge financing, providing temporary funds while investors arrange longer-term financing or complete property renovations.

Using hard money loans comes with several advantages. They offer quick funding, which is crucial for investors needing to act fast on deals. The application process is more straightforward and less dependent on credit scores, focusing instead on the value of the property.