Successful property investors have and always will rely on these loans to get property deals done. Due to their small size as well as personal involvement, hard money lenders usually close faster and with much less paperwork compared to conventional lenders. Properties funded by these funds are stronger and have higher chances of acceptance than an offer with down payment with traditional financing. When dealing with conventional lenders, your income and credit are two of the most crucial criteria. Hard money lenders are concerned with the value of the collateral and less concerned with your credit worthiness.
There are a number of different types of loans that are considered to be hard money loans, including mortgage financing, bridge and residential equity.
For mortgage-financing, you take out a loan that is a greater value than your original loan on the residential property. Bridge loans are used when a seller is buying a new home before selling an existing one.
For a residential equity loan, your house acts as collateral to guarantee you will pay it back.