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January 29th, 2011

Exactly what is a private hard money lender?

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Real Estate Market-MoneyHard money, or private lending, is gaining popularity as financing remains tight. But borrowers need to know exactly how it works before they sign for a loan.

Private hard money lenders are often the only alternative when banks and brokers are unwilling to lend. In today’s economy, they are understandably in high demand.

Exactly what is a private hard money lender? It is a lender that does not use conventional standards to extend credit to borrowers. While banks and brokers evaluate credit history, income and debt to determine creditworthiness, private hard money lenders will often provide a short-term loan based on the underlying value of the property. Though they sometimes are difficult to find and their terms can be steep, private hard money lenders are often a good option when traditional financing is out of the question or when cash is needed quick.

Investors looking for foreclosure bargains and homeowners looking to buy some time are two groups increasingly pitching private hard money lenders.

Hard money for foreclosure investing

Recent studies reveal that more people are buying foreclosures investing than ever before, and many are using private hard money lenders to complete their purchases.

Jason Parker, operator of www.ShortSaleSuckerPunch.com, states, “Our clients oftentimes use short-term hard money to lock up hot deals that are too good to pass up. Then, they either partner up with another investor to refinance the deal or sell it to an end buyer, leaving plenty of profit on the table for everyone involved.”

Parker says many of his buying strategies don’t even require hard money, but knowing where to find it quickly is an added layer of security for investors.

Hard money to avoid foreclosure

Homeowners trying to avoid foreclosure may take on hard money financing to gain time to sell the property. If you have significant home equity, your goal is to sell your home in a way that pays off the lender and maximizes your proceeds. A foreclosure sale on the courthouse steps does not accomplish those goals. So you refinance with a hard-money lender (some offer very short terms and require no payments), market the property, and hopefully sell it before re-defaulting on the home loan.

Be sure to continue reading the rest of this article,  “Hard to get financing? Walk softly into hard money lending.”

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7 Responses to “Exactly what is a private hard money lender?”

  1. Tweets that mention Exactly what is a private hard money lender? | HSH Financial News Blog -- Topsy.com Says: January 29th, 2011 at 8:28 am

    [...] This post was mentioned on Twitter by HSH Associates, Susan Jones and Real Equity Ventures, Robert Prieto. Robert Prieto said: Exactly what is a private hard money lender? http://bit.ly/gM3Tb4 [...]

  2. John Hopper Says: February 3rd, 2011 at 5:52 am

    Private money lender according to me is some who values the property and not the borrower.

  3. Jason Says: July 21st, 2011 at 5:46 pm

    Thanks for the post! I would like to comment as I provide hard money loans in GA, Hard money is an alternative to traditional financing, if your bank is not lending than hard money may be a good alternative for you. We typically base our approval on the properly equity. You can refinance free and clear property and you can also purchase houses with poor credit if you have a large down payment.

    Jason
    Hardmoneyloansga.com

  4. Clay Says: October 27th, 2011 at 6:09 am

    Great post. Although I am familiar with private money lending, I still learned a few things. For the investor who is brand new, this is a very informative article.

  5. spikemike Says: November 10th, 2011 at 11:51 pm

    I am new at the whole hard money lending, but this post has been both pleasant to read and very informational as well.

  6. The Boyd Capital Group Says: January 12th, 2012 at 4:18 pm

    We are a nationwide hard money lender.

  7. San Francisco Hard Money Lenders Says: February 20th, 2012 at 2:24 am

    Great post…Even though I have San Francisco Hard Money Lenders Company but I still eager to learn more about it…Thanks for sharing the nice post….

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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