Hard Money Mortgage
When you have poor credit,
you may be looking for a bad credit mortgage. However, if you do not currently have a steady income history along with your bad credit
history, there aren't very many lenders who have loan products to offer you. One solution that is available but expensive is the hard money mortgage.
This type of mortgage is being used more and more often for people who need a
bad credit mortgage.
If you have never heard of this type of
mortgage product, you are not alone.
"Hard Money" is a term that refers to a loan that is asset based or secured to the
real estate or home that the purchaser wants to buy. These types of loans are
generally not made for commercial property but are for individuals with homes that may be in a challenging
financial situation, such as someone with very poor credit who doesn't have a good income
history. Often, people who are self employed and have bad credit may need this type of loan because
they can't qualify for any other mortgage loan or mortgage refinance.
With this type of loan, the credit score is
not an important factor because the loan is being secured by the asset value of the
property. Generally, the private lender or private investor making the loan will not lend more than
60 to 70% of the quick-sale value of the property. This ratio is called the LTV
or loan-to-value ratio. The reason for this lower LTV is that if the homeowner were to default on the loan and the
property must be sold within one to four months, this is the value that the lender can reasonably expect to
get out of the home. As you can see, this is different from the market value appraisal. The interest rate for a hard
money mortgage is also usually much higher than for other more traditional loan
When an individual takes out a hard money
loan, his plan is usually to work on improving his credit score and income consistency so that he can eventually
get mortgage refinancing at a lower interest
type of loan is not one that most people would actively pursue unless every other option has been
exhausted. This is one of the reasons it is often referred to as a last resort
loan. However, for a person who has the down payment but does not have the credit and employment
history necessary for other types of loans, a hard money mortgage may be the best way to get into a