Everybody is pretty much aware that the economy has changed and the way a lot of things have been done has changed. Banks no longer lend like they did before the economic recession struck, and they take even longer to reach a decision than they did before. However, there are still ways to locate funds to complete investment type deals by using hard money lending sources.
These types of lenders are investors as well who specialize in doing mostly commercial loans in the areas where they live. What they essentially provide are bridge loans that will cover the cost of purchasing a property that either cannot qualify for a traditional mortgage, or the people looking to obtain the funds for a project are in some kind of financial distress where they are in a bankruptcy or foreclosure proceedings and they themselves cannot get the funding they need.
Another reason a person may seek the assistance of a hard money lender is that the deal must take place quickly or it will not happen at all. This occurs during short sales, where the land or building is selling much lower than it normally would, because the land became over valued and the mortgage is much high than the land is worth.
There are people who look for opportunities to help people purchase the property for the one willing to buy it, and they will supply enough funding to help make the transaction occur. Although, there are some limitations as to how much help they are willing to provide. They also do not want to wait a long time before they are paid back.
For instance, say a buyer sees a home that is going for a very low price, but needs a lot of work to get back into shape to either rent or sell it for a good price. The lenders will determine what its worth will be and figure out the prospects for them getting their initial money back as well whatever profit they hope to attain. If everything looks good, they will move ahead. However, if this does not make financial sense, they will probably back away.
One of the differences between these lending groups and the banks is the cost of borrowing the money. They are not looking to lend the money for more than six years in most cases, and the interest rate they charge can be in the neighborhood of 10 to 15 percent. This actually works in the one seeking the funds favor as it acts as an incentive to try to find a traditional mortgage once the property is fixed up.
One of the good things is that in these situation the lenders really do not care about credit rating of the potential buyer, or if this person is involved in any type of foreclosure or bankruptcy proceedings. This is because they lend based on the value of the property. They will not give enough to cover the whole cost, usually they only cover 60 to 70 percent of the value, and this will give them some room to still make money if they have to sell it to get what they lent back.
Although the economy has changed and getting cash is not as easy as it used to be, there are still avenue to explore to find what one may need to complete a real estate transaction. Hard money lenders can sometimes help when no one else can.
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