Hard money lenders can also be called hard money investors. That’s because every penny they release to borrowers is also an investment they wish to get profit from. Unlike other traditional lending institutions, these lenders do not have an obligation to approve loans from all borrowers. Regardless of the borrower’s creditworthiness, these lenders usually approve loans that they think are worth investing in.

First of all, you must know that this form of investing is asset- or collateral-based. Therefore, you will need to present collateral to be able to access this mode of financing. Real estate investors usually do not have problems with this conditional because they can use the investment property as collateral. That means that the house will go to the hard money investors in case the borrower is not able to settle the loan. However, you should also know that these lenders do not want to manage properties. The lending business is much easier because they simply release the money and wait for the interest and principal to come back. Why deal with sellers and buyers if you can only deal with one party: the borrower. For that reason, they are very careful when screening borrowers. Are you qualified?

Most of the borrowers who come to hard money lenders are rehabbers. These investors buy cheap properties and then resell them after making some improvements on the house. Instead of going to banks, they usually go to these lenders because of three things: One is they get a good deal affirmation. Second, their application is processed faster. And lastly, they get bigger loans.

An application for a hard money loan is usually processed up to two weeks. Bank loans, on the other hand, are processed in around 30 days. Rehabbers and other investors obviously want to get the money as soon as possible so they can seal the deal faster. They want to win the competition and getting fast financing is one way of doing it.

As for the bigger loans, that’s because hard money investors use the good condition value of the collateral, or the investment property, when giving out loans. That means that if a dilapidated house is worth $45,000 in its current condition but is worth $90,000 in good state, the loan will be based on the latter amount. The bank will use the former amount.

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