If you are interested in investing in real estate, such as if you want to buy a property to rent out, you might assume that you'll need to go through a traditional mortgage lender to do so. However, there is another option that you might find is better for your situation: using a hard money loan. These are a few signs that this might be the case for your investment.
1. You Need a Loan Quickly
As you might already know, applying for and getting approved for a traditional mortgage can be a long and time-consuming process. If you want to make a move fast, however -- such as if you have found a piece of property for a great price and if you think it will be sold quickly -- a hard money lender can be a good choice. This is because these loans can often be secured a lot more quickly than traditional mortgages, allowing you to get the funds that you need quickly so that you can make the investment that you are interested in.
2. Your Credit Isn't Good
Just because your credit score isn't good doesn't mean that you might not want to invest in real estate. However, traditional mortgage lenders can be very tough when it comes to credit scores and credit reports. Even if you were able to qualify for a mortgage for your existing home with not-so-good credit, you might find that it's a lot harder to qualify for a second loan. Even though your credit might be considered when you use hard money lenders, these loans are typically more based on your collateral and not your credit score. This means that a hard money lender might approve you for a loan when a traditional mortgage lender wouldn't have.
3. You're Buying a Non-Traditional Property
In many cases, mortgage lenders are quite strict about the properties that they will make loans for, so it could be tough to get approved for a fixer-upper that needs a lot of work, a home with termite damage or a home in a flood zone. With a real money lender, you might find that it's easier for you to get approved for a non-traditional property.
As you can see, a hard money loan can be a good option for a real estate investment in many situations. These are a few signs that you might want to look into a hard money loan so that you can make the real estate investment that you are interested in.