Many real estate investors have their own explanations for choosing to work with hard money lenders. Each one would be able to come with their very own list of advantages and disadvantages. However, sometimes a common sense list of good reasons can be developed.
The Pros of Hard Money Loans
Often before deciding whether to work with a certain type of lender, the advantages need to be taken into consideration. Here are some advantages listed below:
- leniency toward low credit scores
- leniency towards bankruptcies & foreclosures
- open to waiving some underwriting fees
- open to adding fees to closing costs
- extra money for a property renovation
Things happen and sometimes an investor can find that they have a few things on their credit that have brought down their credit scores. Most hard money lenders believe that just because an investor has had a few bumps in the road, they should not be able to continue doing what they love.
Look bankruptcies and foreclosures can bring down the credit score of a client. As long as the potential borrower is upfront about why it happened, most hard money lenders will be more than happy to move past that. Look things happen, life happens.
Traditional mortgage lenders have this hardline barrier against people with bad credit, but not hard money loans. Birmingham hard money loans make the effort to work with anyone that needs financing. Traditional mortgage banking has turned down a lot of hard-working business owners who simply were trying to make a living.
This doesn’t happen at hard money lenders. Private lenders use their own money, unlike traditional banks that use the community’s money. So they are not held accountable for anyone but themselves. With this in mind, most are more than willing to work with clients that have unfavorable credit as long as they can come up with the collateral and down payment.
The quickest way to fill a room with anxiety is while calculating all of the underwriting fees and charges. Some of the fees are the origination fee, title search fee, appraisal charges and more. It can actually get pretty complicated and in many cases, some clients are surprised by the total costs. Birmingham hard money loans enjoy making things easier for the client.
They understand that one way to keep a customer is to make complicated processes simple. Reducing or waiving some of these charges are not unheard of. There’s no harm in asking. If the fee isn’t waived perhaps it can be added to the closing costs. It’s surprising to know how much stress can be alleviated by not having to make a payment right then and there.
Especially, very large charges like the origination fee. This fee is normally 1% of the total costs of the home. So if the total loan is $100,000, the origination fee could amount up to $1000. Adding this fee to the closing costs is not uncommon.
The better the credit of the potential borrower the more likely a fee could be waived. The absence of foreclosures and bankruptcies always help in such financial situations. Also having a few good references of people that can vouch for the financial decision making of the client can do nothing but help.
Real estate investors find it convenient to do business with hard money lenders because they understand the real estate industry. They understand that not only does there need to be funding provided for the purchasing of the property, but also funding to renovate it. Depending on how much renovation is needed the cost of what’s needed may be increased.