Direct Hard Money Lenders: A Guide to Loans and Lending

Direct hard money lenders offer short-term, high-interest loans for real estate investors and developers. These loans are typically used for fix-and-flip projects or other short-term investments.

They usually have a loan-to-value ratio of 60-70% and a repayment period of 6-12 months. This allows investors to quickly access funds for a project and then repay the loan once the property is sold.

Hard money lenders often have a network of private investors who fund the loans, which can make the application process faster than traditional bank loans.

Direct hard money lending is a financing option that involves borrowing money from private lenders or investor groups, using real estate as collateral.

These lenders are not conventional banks, but rather individuals or groups who invest in real estate loans.

Hard money loans are often used by investors, such as house flippers or developers, who need quick financing to secure a real estate opportunity.

The main distinction between hard money loans and conventional home loans is that hard money lenders focus on the value of the property and the borrower's equity, rather than their income history and credit scores.

Hard money lenders typically require a down payment of 25-30% or more, which is higher than what conventional lenders require.

Hard money loans are usually only for short-term use, with terms ranging from 3-4 years, and borrowers need to have an exit strategy in mind when applying.

The interest rates for hard money loans are generally higher than conventional loans, ranging from 8-11% for a 1st loan and 10-14% for a 2nd mortgage.

Despite the higher interest rates, the fast funding and flexible lending criteria make hard money loans an attractive option for real estate investors who need quick financing.

Hard money loans are secured by the property they're tied to, not the borrower's credit profile. They're often used by those who buy homes to fix them up and sell quickly.

These loans usually have a short repayment term, less than a year. They're a good fit for investors who want to buy, fix, and resell properties.

Hard money lenders typically lend based on the property's value, not the borrower's income or credit history. This makes them a viable option for those with less-than-perfect credit.

The loan terms can vary, but some hard money loans are structured as interest-only loans, followed by a large balloon payment. This makes them riskier than other kinds of financing.

In California, hard money loans are asset-secured, meaning the lender can force the sale of the home through foreclosure if the borrower defaults. This makes them more willing to lend to higher-risk borrowers.

Hard money lenders charge higher interest rates, typically between 8% and 15%, to compensate for the increased risk. They're not meant to be used long-term, but rather as a short-term solution.

Before working with a hard money lender, it's essential to research their requirements, such as escrow requirements, loan-to-value ratio, and supported property types. This will help you find the right lender for your needs.

Direct hard money lenders offer a range of loan products to cater to different investment strategies. Hard money loans are secured by the property itself and offer a flexible option for those with less-than-perfect credit.

There are four main types of loans offered by direct hard money lenders: Fix & Flip, Bridge, Refinance, and New Construction. Fix & Flip loans cover purchase price + rehab costs, while Bridge loans are popular among investors needing to close fast.

Here's a breakdown of the loan products:

These loan products offer flexible terms, including interest-only payments and no prepayment penalty.

Traditional Mortgages are a common way to finance a home, but they have some key differences compared to other types of loans. A traditional mortgage typically has a 15- or 30-year timeline for repayment.

A conforming conventional loan can be had for just 3 percent down, which is much lower than the down payment required for a hard money loan. This lower down payment makes traditional mortgages more accessible to homebuyers.

Unlike hard money loans, traditional mortgage interest rates are generally lower. Traditional mortgage interest rates are not as heavily influenced by the value of the property as they are by the borrower's credit score.

If you're planning to take out a traditional mortgage, be prepared for a longer application and closing process compared to a hard money loan.

Hard money loans are a type of financing that can be a good option for borrowers who don't qualify for traditional loans. They are often used by real estate investors to finance home purchases, and can be a way for borrowers with assets but poorer credit to access funds.

Hard money loans are secured by physical assets like property, and are typically non-recourse, meaning that if the borrower doesn't repay the loan, the lender can only seize the pledged asset. This is different from soft money loans, which are backed by the borrower's credit and obligate them to repay the full amount borrowed.

Hard money loans are known for their fast approval and funding timelines, often closing in as little as 7 days, compared to traditional bank loans which can take 4-6 weeks to close. However, they are also more expensive, with interest rates ranging from 8-12%.

Here are some key characteristics of hard money loans:

Hard money loans can be used for a variety of purposes, including:

Some popular hard money lenders include Stratton Equities and EquityMax, which offer a range of loan products and flexible terms.

Homeowners with substantial equity facing foreclosure may have a lifeline in direct hard money lenders. These lenders consider lending to homeowners who have a lot of equity in their homes but are at risk of foreclosure.

They can offer a way out of foreclosure by providing a loan that allows them to sell the house, pay off the first mortgage, and still earn a profit from the sale. This can be a complex situation, but hard money lenders can help.

Their primary concern is ensuring they can recover their investment in case the loan goes into default. This means they need to be confident that they can sell the house for enough to cover the loan and still make a profit.

In some cases, hard money lenders may be the only option for homeowners in this situation, as traditional lenders may not be willing to lend due to the risk of foreclosure.

Direct hard money lenders offer a unique financing option for real estate investors. They can be a game-changer for those who need quick access to funds.

Hard money lenders tend to be flexible when it comes to negotiating loan terms. This flexibility can be a major advantage, especially in competitive real estate markets.

One of the biggest benefits of working with a hard money lender is the speed at which they can process loans. Compared to traditional mortgage underwriting, hard money loans can be processed in just days.

You don't need a good credit score or loads of financial documentation to get a hard money loan. Hard money lenders extend loans based on collateral, such as a house or building.

Here are some key pros of working with a direct hard money lender:

Keep in mind that hard money loans can be a good option for commercial properties, too. In as little as 8-12 days, you can secure a commercial loan from a hard money lender for up to 70% of the property's value.

Finding a lender can be a daunting task, especially when it comes to direct hard money lenders. You can get a referral from people who work in real estate, such as a real estate agent or attorney.

Talking to a title office is another option, as they record loans for hard money lenders regularly and can give you referrals to lenders who lend in your area. Robert Taylor, a full-time real estate investor, recommends this approach.

Searching online is also a viable option. You can search for lenders in your area or in a different state altogether. If you're looking for lenders in a different state, you can click on your state below to find the best hard money lenders.

If you're looking for a lender in San Diego, North Coast Financial offers fixed rates from 9.95% and lender fees from 1.5 points. They also offer same day pre-approvals and can fund loans within days.

Here are some common types of loans offered by direct hard money lenders:

San Diego, California has a top hard money lender, North Coast Financial, with over 40 years of experience and over $800 million in funded California hard money loans since 1981.

Hard money loans in California are more readily available for high-value and higher risk homes, making them a great option for those with less than desirable credit.

One of the main benefits of hard money loans is that they can close quickly, often in a matter of weeks, providing a faster way to obtain funds for investment properties or commercial real estate development.

For investors looking to buy a property to flip it, hard money loans provide access to the cash needed for repairs and renovations, allowing them to pay off the loan when they sell the property.

Hard money loans can be beneficial for those who want to secure a home quickly, based on its expected after repair value, and then replace the loan with a lower interest rate loan later.

In Missouri, you can find a variety of hard money lenders to work with. Forecasa™ provides quarterly analytics data on hard money lending in the state, which can be a valuable resource for investors.

According to Forecasa™, the top 10 hard money lenders in Missouri, ranked by the number of loans originated from July to September 2024, are listed below:

In the first quarter of 2024, the average interest rate for Missouri hard money loans was 11.84% according to Lightning Docs. This is based on 54 short-term loans funded by multiple hard money lenders who use Lightning Docs as their preferred software provider.

The average loan amount for these loans was $161,928. This is a significant amount, but it's worth noting that loan amounts can vary widely depending on the specific project and lender.

Another data provider, Analytics Logics, reported an average interest rate of 11.74% for Missouri hard money loans in the same quarter. This is slightly lower than the rate reported by Lightning Docs.

Lenders charged an average of 2.4% points (origination fee) on these loans. This is an important consideration for borrowers, as origination fees can add up quickly.

The average LTV (loan-to-value) for hard money loans in Missouri was 61%. This means that borrowers typically need to come up with 39% of the purchase price in cash or other forms of equity.

If you're looking for a local hard money lender in Missouri, there's one option to consider: Minnow Loan. They're an asset-based direct lender focused on lending throughout the state, with a presence in major cities like St. Louis, Jefferson City, Columbia, Kansas City, and Springfield.

Minnow Loan offers a range of hard money loan types, including bridge loans, rehab loans, fix and flip loans, ground-up construction loans, and transactional loans that can close in as little as one day. They're not too concerned about credit scores, and they often don't require a formal appraisal for most deals.

If you're looking for a broader view of the Missouri hard money lending landscape, you can check out the top 10 hard money lenders in the state, ranked by the number of loans originated from July to September 2024. Here are the top 10 lenders, according to Forecasa™:

If you're looking to invest in real estate across the country, there are many states to consider. California has one of the country's most robust and high-value real estate markets, especially in the Los Angeles and San Francisco Bay areas.

The median sold price of a single-family home in California is $863,790. This is significantly higher than the median sale price in many other states. In fact, the San Francisco Bay area has a median sale price of $1.4 million, while Los Angeles has a median sale price of $800,000.

If you're looking to invest in a state with a lower median home price, you may want to consider Missouri. According to Forecasa, the top 10 hard money lenders in Missouri are listed below:

These hard money lenders can provide financing for fix-and-flip loans, construction loans, and other types of real estate investments.

Riverside County is a popular destination for real estate investors, thanks to its growing economy and affordable housing market.

The county's median home price is around $430,000, making it an attractive option for investors who want to flip properties or rent them out.

Direct hard money lenders can be found in Riverside County, offering short-term loans with flexible terms for renovation projects or fix-and-flip deals.

These lenders often have a strong presence in the county, having provided over $1 billion in loans to local investors in the past year alone.

Some popular hard money lenders in Riverside County include XYZ Lending and ABC Capital, which offer competitive interest rates and fast funding for qualified borrowers.

Finding a reputable direct hard money lender can be challenging, but there are several options to consider. North Coast Financial, a direct hard money lender in California, has over 40 years of experience and offers a wide range of financial products.

Here are some key features of North Coast Financial:

Other notable lenders include HouseMax Funding, which lends up to 75% of the after-repair value (APV) with a minimum loan amount of $75,000, and Easy Street Capital, which offers interest rates ranging from 6.9% – 10.9% and points ranging from 2-3.

In St. Louis, you've got options for hard money loans. Minnow Loan, a local direct lender, funded a $200,000 first-lien position hard money loan secured by a single-family home in St. Louis, MO, with an estimated property value of $340,000.

The loan-to-value (LTV) ratio was 59%, and the interest rate was 12.5% with 3% origination points. The loan term was set at 12 months.

Minnow Loan also provided an additional $40,000 in cash for the new project, funded on the same day. This shows that they can structure creative solutions for borrowers in need of funding.

If you're looking for a lender that lends nationwide, except in North and South Dakota, Easy Street Capital is a good option. They offer hard money loans with interest rates ranging from 6.9% – 10.9%, and points ranging from 2-3.

A document fee of $1495 is also required. There is no minimum credit score required, but down payments of at least 10% are required. Renovation financing is also okay, and fix and flip loans typically do not have prepayment penalties.

Here are some key features of Easy Street Capital's hard money loans:

North Coast Financial is a direct hard money lender with over 40 years of experience in California. They offer a wide range of financial products, including bridge loans, trust loans, probate loans, and fix and flip loans.

North Coast Financial has a strong reputation, with a 5-Star Google Review Rating and an A+ Rating from the Better Business Bureau. They have funded over $800 million in loans.

The hard money loan application process with North Coast Financial is quick and easy, with loan approvals frequently completed the same day the application is received. Once approved, funding can be received in as few as 3-5 days for investment property and 2-3 weeks for owner-occupied property.

Here are some key highlights about North Coast Financial's lending products:

North Coast Financial requires a significant down payment in the 25-30% range, and borrowers must demonstrate that they have funds for loan payments, taxes, insurance, and other holding costs. They also require a clear exit strategy for the property.

Overall, North Coast Financial is a reputable and experienced hard money lender with a wide range of financial products and services.