Hard Money Lender Queens

Hard money lenders in Queens, New York, unlike traditional banks, are non-bank institutions that specialize in asset-based lending. While both banks and hard money lenders offer mortgage loans, there are notable differences in their requirements and criteria. Hard money lenders place a stronger emphasis on the value of the underlying property and less on the borrower’s qualifications. This results in a significantly shorter underwriting process, with loans often funded within a week—contrasting with the lengthier timelines typical of traditional banks, which can extend to 2-3 months or more.

As a result of their streamlined processes, real estate investors, particularly those purchasing foreclosures at auctions, often turn to hard money lenders to facilitate quick transactions mandated by auction terms. Additionally, hard money lenders finance properties that traditional banks may decline, including those lacking a Certificate of Occupancy (CO). Furthermore, hard money lending offers viable options for individuals with poor credit or those seeking to rebuild their credit, as a low FICO score does not necessarily disqualify applicants from obtaining a loan.

Moreover, hard money lenders provide a range of lending solutions beyond property acquisitions, including refinancing existing loans and accessing cash from property equity. This versatility makes them an attractive resource for investors looking to leverage their real estate assets.

It’s crucial to recognize that hard money lenders specialize in funding investment real estate projects and do not offer mortgages for residential purposes. Properties financed by hard money lenders are intended for investment purposes only and cannot be used as primary residences.

Due to the expedited nature of hard money loan processing, obtaining one is much quicker and simpler compared to securing a traditional bank mortgage. However, this convenience comes at a cost: hard money loans typically carry higher interest rates, usually ranging between 9 and 12%. Additionally, borrowers can expect to pay between 1 and 3 points at closing.

The term of a hard money loan is generally shorter, typically lasting 1 or 2 years. These loans are typically divided into two parts. The first part, often covering 65-80% of the purchase price, finances the property acquisition. The second part provides funding for any necessary property rehabilitation, with hard money lenders often funding up to 100% of the rehab costs. If no rehabilitation is necessary, it will not be included in the loan.

For properties requiring rehabilitation, funds are disbursed incrementally, typically after completion of each portion of the work. For instance, if a total of $50,000 is needed for rehab, the borrower may request $15,000 after completing the initial phase of work, with subsequent disbursements following a similar pattern. Hard money loans are usually structured to ensure that the total loan amount, covering both purchase and rehab funds, does not exceed 65% of the property’s after-repair-value (ARV).

Hard money lenders typically extend their financing to LLCs rather than individuals, as hard money loans are classified as commercial loans. However, creating an LLC is a straightforward process, and it’s nothing to stress about if you don’t have one already. An LLC can be easily formed, and it can even have just one member, which can be yourself.

Hard money lenders meticulously assess both the purchase price and the After-Repair Value (ARV) to protect their loan investments. Acquiring a property below or at market value plays a vital role in the loan approval process. Additionally, if the borrower intends to finance rehabilitation work, the lender ensures that repairs progress according to the predetermined schedule and are completed in a timely manner. A clear title is also crucial for hard money loan approval. Any existing judgments or liens on the property or the LLC taking out the loan (as loans must be made to an LLC) must be resolved before loan disbursement.

Hard money lenders prioritize the profitability of their borrowers’ investments or transactions. Their goal is for borrowers to earn returns from their real estate ventures to facilitate loan repayment. To achieve this, the lender verifies the presence of adequate “spread” in the deal. This entails ensuring that the After-Repair Value (ARV) covers not only the purchase price and renovation costs but also the loan interest, closing charges, and any other relevant fees, with sufficient margin for the investment to be profitable for their clients.

A hard money loan in Queens is most often used in the following scenarios:

• Undertake the purchase and restoration of a property that traditional banks are unwilling to finance (either due to the property’s condition or the borrower’s creditworthiness), with the goal of selling it to a retail buyer. This approach is commonly recognized as “fix and flip loans.”
• Procure and rehabilitate a property that does not meet traditional bank lending criteria, aiming to lease it out. Once the property achieves stability through rental income, it may qualify for refinancing with a conventional bank at a more competitive rate.
• Hard money loans are frequently employed for time-sensitive real estate acquisitions, such as those at foreclosure auctions, where traditional banks may not be able to meet the timeline. While hard money lenders can often fund purchases within a week, banks may take 2 or 3 months or longer.
• Secure swift cash-out refinancing by utilizing an owned property as collateral.
• Expedite the refinancing process for another mortgage on a property nearing its maturity date.
• Facilitate property acquisition under the umbrella of an LLC. Traditional banks typically refrain from funding LLCs, making hard money loans an attractive alternative for individuals seeking to own properties outside their personal names.