Private Hard Money Lenders

Private hard money lenders are non-bank, unconventional lenders who are either high networth individuals, pension funds, Individual Retirement Accounts (IRA's) or hedge funds.  These lenders are looking for higher returns on their investments and so they are attracted to hard money lending because of the potential steady stream of high interest payments, backed by real estate as collateral.  

There is much confusion as to what a hard money lender is and what set of rules they operate from.  I've run across borrowers who likened hard money lenders to "loan sharks" and "bottom feeders", or that taking a loan from a hard money lender is like selling your soul to the devil.

The truth is, these unconventional lenders have a very important role to play in our credit markets, especially since traditional financial institutions have severely tightened and have practically stopped extending credit to qualified borrowers .  Private hard money lenders are misperceived partly because they seem to operate from outside the norm and  that they charge high rates and fees.

Here are some advantages of borrowing from private hard money lenders:

Speed

Private lenders can often fund and close a hard money loan faster than a conventional lender.  The decision maker is often the individual investor instead of a loan committee who has to go through a rigorous underwriting process.  If the key elements required are present in the loan request package, it's not unusual for a private hard money lender to fund and close in 7-10 business days.

Less Paperwork

Often times, the only required paperwork is a loan application, appraisal, credit report, and the preliminary title report.  Private money lenders do not care about credit scores, but they do take a look at your credit report to see what other liabilities you may have.  If you occupy your property as your primary residence, even hard money lenders are now required to ask for proof that you are able to afford the monthly payments based on your current income.  You can no longer go on stated income if you're applying for a loan on your primary residence.  Exception:  You can still go stated if you are using the loan proceeds for business purposes.    You can still state your income if the property is not your primary home and you do not occupy it at the time of your application.

Regulation

Private hard money lenders must adhere to the same laws with regards to process and disclosures as a conventional loan.  You as a consumer are protected by the same laws that dictate rights of rescission, foreclosure proceedings, and again, disclosures.  

Many borrowers are spooked into thinking that hard money lenders are all predatory and that they are there to "loan to own" and are waiting for you to make the slightest mistake and "snake" the property from underneath you.  This is simply not the case.  Hard money lenders are bound by the same laws as conventional lenders and are subject to the same  foreclosure procedures.

Lenders of Last Resort

Private hard money lenders serve as lenders of last resort and often times needed to stop a pending foreclosure, or to save a lucrative deal that needs to be funded and closed fast.  Many savvy real estate investors have been using hard money loans for decades.  They recognize the efficiency and effectiveness of using a private lender in time sensitive situations.  I myself have helped homeowners with pending foreclosures to get a hard money loan to cure the default, stop the foreclosure, and buy some time for the borrower to execute a plan to get back on track.  

Where to Find Private Hard Money Lenders

There are several ways to find private lenders.  Please read below and then go to List of Hard Money Lenders to see a list of lenders in your area.

Direct Hard Money Lender 

In order to find a private money lender directly, you will have to do the research yourself. The internet makes it very easy to do a search and start calling for information. You can also call some of your trusted real estate agents and brokers to see if they know of anyone they would highly recommend.   But first, you need to learn what "direct lender" exactly means:

If you call a lender and they tell you that they are a direct lender, chances are that they are not "the investor" themselves, but rather someone who is in charge of a mortgage or investment fund that holds shares from several high net worth individuals who pooled their money together to invest in trust deeds.  They may say that they are a direct hard money lender because they have the decision making power to approve and fund the loan.  

A true direct private hard money lender is "the" investor himself or herself, funding loans with their own money.  

In any case, going through either type of direct private money lender may save you on costs since it bypasses a hard money broker, therefore you will not have to pay additional commission.  Although sometimes, it may be beneficial to go through a broker.  Please keep reading below.

Hard Money Broker

A licensed mortgage broker or sales agent is also a very good source of hard money loans.  Many advertise on the internet as well as in magazines and newspapers.  These brokers represent the individual investors who rely on the brokers to properly underwrite and package the loan for submission and approval by the interested investors.  They often service the hard money loans as well.  Make sure you do your due dilligence on whoever you decide to go with and don't forget to ask all the qualifying questions.


Go to Residential Hard Money Loan

Go to List of Hard Money Lenders

Return from Private Hard Money Lenders to Foreclosure Help Center Homepage