What is a Hard Money Loan?
Hard-money loans are mortgage loans that are offered by private individuals or companies rather than financial institutions, such as banks or traditional lending institutions. These entities are known as "hard-money lenders." Borrowers who either do not qualify for mortgages through financial institutions, or who do not want to put up with possibly lengthy waits for loans to close, often go to hard-money lenders. These borrowers can sometimes have bad credit, insufficient income, or other factors that are considered undesirable to financial institutions. Property conditions may play a role as well, in why financial institutions categorize these borrowers as high risk. But other times, borrowers simply don’t wish to become embroiled in the seemingly never-ending red tape that traditional lending institutions require. A hard-money loan may also be an attractive choice for borrowers who are behind on their mortgage payments, or in danger of foreclosure.
With a hard-money loan, a private individual (or individuals) acts as the lender and extends a loan to the borrower. The hard-money lender can be a person, a trust, a real estate investment group, or any other private group.
More: The Kennedy Hard Money Funding Glossary.
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