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Hard Money

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Hard Money Program

Hard Money Loans are an alternative form of lending for investors who don’t fit traditional lending criteria. We offer Hard Money programs at some of the industry’s lowest rates to individuals, corporate entities, and foreign nationals. Because these loans can be executed so quickly, they can be used to bail out a borrower who has attempted to go a traditional route and are in danger of losing their purchase contract.

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Hard Money Loans are an alternative form of lending for those who don’t fit into the square peg of traditional lending products. These sorts of loans are meant to be a quick help to those who need quick money to pay back in a short time. Hard money loans are made to help different people in different situations. Such as those buying into new construction condos that don’t fit agency guides, investors who are looking for quick cash, people buying a short sale and need to make foreclosure deadlines.   Hard money loans are a lending product that are meant to be unconventional and made for the unconventional borrower.

Now what exactly is a hard money loans? Hard money loans are short term loans meant to be a quick fix. See most conventional, FHA, or VA loan products are set up to last between 15 and 30 years. In the case of hard money lenders these loans are meant to be paid back in six months to three years. This is partly why hard money loans are traditionally marketed to flippers (people who purchase homes to fix them up to resell for profit).

Another property type that qualify for hard money loans are retirement properties. Such as those with golf courses, co-ops, age restrictions, and other resort amenities. Some of these properties have issues that do not meet guidelines like the HOA participates in renting of units like a hotel, or has a spa, country club or golf course with mandatory upfront dues. Or an onsite nurse office or doctor’s office. Or one of the trends in areas is high rise condos with large amounts of commercial space which are becoming a trend. 

There is another property type that is a god fit for potentially taking a hard money loan. That is properties sold at auction. Many of the properties sold at auction are marketed lower than the average home sale prices for equal properties. Although some need work and not all allow for viewing of the property prior to auction. Nor are pest and engineering inspections often required on an appraisal during a conventional loan process. So, it is another unconventional property type that fits for the unconventional loan type.

Hard money rehab loans are popular amongst real estate investors. This product most used in areas where home prices are rising steadily. Investors use this product to purchase properties that needs work and sell below market value. Once the repairs are complete, investor put the property back on the market and sell it at profit. The loan gets repaid at closing.

Hard money loan after short sale is widely used by the borrowers who do not qualify under conventional bank programs. This might be due to Fannie Mae derogatory credit waiting period of four years. Many borrowers would turn to hard money as a bridge to close the gap needed to meet Fannie Mae waiting periods so they can refinance under conventional terms. We recommend for borrowers to understand refinance options as an exit strategy.

Hard money loan rates vary greatly from one lender to another. Unfortunately, there are no uniform platform that allows borrower to shop for these types of product. Therefore, it’s important for the borrower to contact several local mortgage companies to shop for best terms available to them. Aside from rates borrower should also look at loan terms to understand all fees. Upfront points and prepayment penalty are as important as the rate.

There are arguments that many who take hard money loans do so because the compliance and underwriting guidelines coupled with high documentation requirements by average lending institutions. However, the truth of that is the matter is that compliance and underwriting guidelines are meant to protect the borrower and the lender from a bad investment and some borrowers are just risky. Although there are some borrowers who are risky according to conventional lending guidelines don’t meet lending requirements because their money is spread around or the borrower has a lot of investment properties.

However, there is another reason why hard money loans can be helpful is for unconventional property types. Such as condos that are ineligible property types or that the use type of loan is not eligible for the property type. Such as a condo project that has a mobile/ modular/ manufactured housing. Or if some wants to buy manufactured or modular homes as a method of saving money and living in the area one chooses. However, most agencies have recently started to lend on modular/ manufactured homes. 

Although they will only do this for properties where there is no ground lease/ ground rent, so, only fee simple land title. Many of these property types are also marketed for affordable housing to seniors and are priced as such which makes a hard money loan use full in these instances. I have to admit I have witnessed loan officers turn down lending on manufactured homes not because, underwriting or guidelines made it not a do able loan. But rather they wouldn’t get enough commission on the loan and advised a borrower to get a high value credit card to buy the property. 

The other examples are those who are trying to buy a condo as an investment property or rental property in projects that have more than 50% investor concentration. Agency guidelines for condo project with 50% investor concentration are not eligible for lending as investment/ non-owner occupied loans. The reason for agencies having this rule is to promote residential lending not commercial lending. And high investor concentration makes a condo project flirt with the fine line between a commercial property and a residential. 

Not all borrowers and not all properties meet the normal conventional lending fashion plate. However, for some a hard money loan may be a reasonable option. Although much like all loan products borrowers should do research to help figure out if this loan type is really for them. Please feel free to contact one of our licensed mortgage professionals for more information.