Texas Hard Money Commercial Loan
What Is a Texas Hard Money Commercial Loan?
A “hard money loan” is often referred to as a short-term bridge loan. These types of loans are backed with collateral in the form of property and it has nothing to do with a borrower’s credit worthiness. Because the loan is protected against default by the value of a piece of property, hard money loans have a lower loan-to-value ratio than traditional loans. We can close these loans in 1 to 2 weeks and we do not look at credit. Rates start in the 6.%-7% range.
Hard money loans will have a higher interest rate than a usual subprime loan. Because traditional Texas banks and lending institutions do not offer hard money loans, these types of loans are offered by private individuals or alternative lenders who see a value in this sort of venture. Hard money loans are used in many different situations including purchasing Texas commercial property or real estate.
Why Someone Might Need a Hard Money Loan
There are many reasons why a person may need this type of loan. These reasons can include a person’s credit not being good enough to get a conventional loan, or there is a need for cash quickly and the property or real estate being purchased does not qualify for an FHA and/or a conventional loan due to needing updates or renovations.
Applying for a hard money loan is very different than applying for one with a traditional lender. Many people who want to borrow money aren’t prepared for the application process. It pays to go to a lender when you’ve got all your ducks in a row and we’re going to tell you exactly what you should do.
Many conventional lenders use a complicated system of credit score and income formulas, along with underwriting guidelines, to authorize loans. However, hard money lenders use basic information and other considerations when determining whether to lend money to someone or not.
To get approved for a hard money loan, there are some things you need to do in order to prepare.
- Find the Right Project: When meeting with a potential lender, you should have your project entirely mapped out in detail, including profit forecasts. Buying real estate to turn a profit is nothing new, but lenders want to see that you have a proven plan in order to be successful at your venture.
- Executive Summary with Exit Strategy: When approaching a lender with a new project, it’s important that you know and can explain your plan in detail. Most lenders are in the market to make money and want to know what you are going to do to repay the loan.
- Full Loan Application: It’s sometimes thought that a hard money lender will just loan money and not look at the borrower’s personal financial situation. Hard money lenders do take a look at a borrower’s finances because they want to ensure the person has the means to repay a loan.
- Property Pictures and Comparable Sales: You should bring pictures of your prospective property and have information about surrounding commercial property values in the same area and town, as it can help speed up the approval process.
- Construction Estimate and Scope of Work: Unless the property is a simple remodel job, you should have your contractor look at the property and write up an estimate of the repair costs. With a firm estimate in hand, you can go to your lender with the information needed to be approved.
- Something of Value: Having cash, cross collateral, and credit to bring to the table will show the lender you have liquid assets and you’re good at saving money. It also shows that in the event something goes wrong, you have the ability to afford to repay the loan.
Thankfully, because Texas commercial lending institutes are free from regulation, it means it’s an attractive option for people who need quick funding. However, you should make sure you work with a credible company who can help you further your goals and achieve success. We have been doing them since 1997 and we have an A+ rating with the BBB.