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Hard Money Lenders and Regular Mortgage Brokers - How They're Different


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Hard money lenders for real estates. The best way to find money for your real estate projects.

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Hard Money Lenders and Regular Mortgage Brokers - How They're Different

  1. 1. ==== ====Check out the link below for more resources: ====Hard money lenders are just another type of mortgage broker--or are they? Well, yes and no.Following are a few ways in which hard money lenders are actually very different from regularmortgage brokers--and what that can mean for real estate investors.Private lenders vs. institutionsRegular mortgage brokers work with a number of institutions such as big banks and mortgagecompanies to arrange mortgages, and make their money on points and certain loan fees. Thebank itself tacks on more closing costs and fees, so by the time the closing is over, the borrowerhas paid anywhere from a few thousand to several thousand dollars in fees, points and otherexpenses. And the more mortgage brokers are involved, the more points the borrower pays.Hard money lenders, on the other hand, work directly with private lenders, either individually or asa pool. If the hard money lender works with the private lenders individually, then for each newloan request, the hard money lender must approach each private lender until s/he has raisedenough money to fund the loan. The money is then put into escrow until the closing.Alternatively, instead of approaching private lenders individually for each new loan, the hardmoney lender may place private money from the private lenders into a pool--with specific criteriaabout how the money can be used. The hard money lender then uses predetermined terms todecide which new loan requests fit those criteria. The loan servicing company that collects theloan payments pays them directly into the pool, and the pool pays a percentage of those paymentsback to the private lenders.Different types of properties--investment vs. owner-occupiedWhile regular mortgage brokers can work with residential properties or commercial properties,hard money lenders vastly prefer investment properties--also known as "non-owner-occupied"properties (NOO for short). Thats because "owner-occupied" (OO) properties have restrictions onhow many points the hard money lender can collect (ex. a maximum of 5 points), and the termmust be at least 5 years.With NOO properties, hard money lenders can charge higher points and fees and offer loans forshorter terms, sometimes even one year or less. While that may seem risky and expensive, theprofit from one good "flip" transaction can easily make up for higher loan expenses.Knowledge of predatory lending lawsOwner-occupied (OO) real estate properties are subject to what are known as predatory lending
  2. 2. laws--a set of laws designed to protect consumers, especially the under-educated, minorities andthe poor--from unscrupulous and unfair lending practices.Hard money lenders must be fully knowledgeable of both federal and state predatory lending laws.And private lenders will only work with hard money lenders, because a regular mortgage brokerusually is not familiar with predatory lending laws and may make a mistake that gets his licensesuspended--and may even jeopardize the private lenders loan.Saving money with hard money lendersNow that weve discussed some of the differences between hard money lenders and conventionalmortgage brokers, you can see some of the reasons for using hard money loans for investmentproperties that you intend to flip or rehab and resell. Heres another reason: by dealing with a hardmoney lender who has direct access to private lenders (rather than several layers of brokers), youmay be saving yourself thousands of dollars in points and extra fees.Furthermore, using a hard money lender can help you quickly obtain the loan you need, with theterm you want, and with no risk to your personal credit. And if you can develop the right kind ofrelationship with the right hard money lender and private lenders, you too can be part of the "innercircle" of real estate investors who seem to find out about all the best deals first--and are buildingreal wealth.Ready to find out more about hard money lending and how it can help you build wealth throughreal estate investments? Visit where you can learn about howto develop a relationship with a hard money lender, how to structure a deal that hard moneylenders and private lenders can’t refuse, and how to put together a winning loan package—plusother tips and insights that help you understand what hard money lenders and private lenders arereally looking for in a deal and how you can provide it!Article Source: ====Check out the link below for more resources:
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