Hard money loans are probably the most known for their use by real estate investors looking to flip or rent out homes, but they are just as easily accessible to families looking for somewhere to live.
Perhaps you’re just starting out in your career but still have loads of student loan debt. A bank might look at your current debt-to-income ratio and not approve the loan amount you want or maybe even not approve it at all.
Hard money loans come from private funders and groups who want to know your situation, rather than just checking boxes for qualifications that a traditional bank mortgage requires.
Hard money can sound intimidating and you should feel confident in your home buying decisions, so we’re going to go over 8 things to know about owner-occupied hard money loans.
What is an Owner-Occupied Hard Money Loan?
An owner-occupied loan simply means that you intend to live in the home that you’re purchasing.
Hard money lenders have to specify this since they often also deal with investors or business owners who have other plans for their properties than to live in them.
While a hard money loan is primarily for short-term projects, Marquee Funding Group is one of the only hard money lenders that offers long-term consumer loans ranging from 10-30 years. Marquee Funding Group is also one of the only hard money/private lenders doing owner occupied loans
Perhaps you’re building a new home and need a loan for the construction before selling your existing home. Or like we mentioned before, you may be new to your profession and still carrying a heavy debt load.
Hard money lenders also don’t put as much weight on things like poor credit or past foreclosures. If you’re a family trying to move on from a past issue and into a new home, traditional financing can get tricky.
These are the situations in which an owner-occupied loan could be your best option. Let’s dive into 8 more things you should know.
1. The Loans are Faster
Since hard money lenders are more lenient and require less paperwork than conventional lenders, the process is a lot quicker.
This especially helps in a competitive market where you can outbid other offers on your dream home because your financing process will go quickly and smoothly.
Marquee Funding Group, in particular, can get you funding in as little as seven days.
2. Bridge Loans are Offered
One type of hard money loan is a bridge loan which we mentioned above. This is used in the case when a borrower has a mortgage on their current home and still needs to get financing for the new home.
A bridge loan allows financing for up to 100% of the new home’s purchase price, secured by both the new home and your existing home.
With a hard money bridge loan, you won’t have to worry about moving into a temporary place once your house is sold but before your loan process for the new one is finished.
You can easily get financing for your new home and then refinance for a new mortgage and lower interest rates when you sell your old home and pay off the hard money loan.
What’s your loan scenario?
3. No Wait for Past Bankruptcies
This advantage of an owner-occupied hard money loan is a big one for people who have had to declare bankruptcy in the past.
FHA, USDA, VA, and conventional loans all have waiting periods from the time of discharge to the time when you’re eligible for a loan again.
If you’ve had a bankruptcy in your past, whether it be chapter 7 or chapter 13, hard money lenders won’t require any waiting periods. Again, they just want to know your situation. And of course, the value of the property that you plan to live in.
4. Loans are Asset Based
Even if the loan will be an owner-occupied property, the hard money lender will still primarily be concerned with the value of the property you’re purchasing.
That’s because the property will be used as collateral to back up the loan.
This is one way that hard money lenders protect themselves from the risks they’re taking on when approving loans without hard financial inquiries.
This is also why they’re more willing to look past things like previous foreclosures or bankruptcies.
Marquee Funding Group prides itself on their common sense lending — if the deal makes sense, they’ll do it.
5. Flexible Employment Requirements
If you haven’t caught on by now, flexibility is the name of the game when it comes to hard money. Hard money lenders have various ways that you can prove your income and don’t have a work history requirement.
Most conventional lenders have a two-year minimum of employment history required.
This flexibility helps borrowers who have a short employment history, are self-employed, work at start-ups, or any other situation that makes them unique and not favorable for a conventional mortgage.
These borrowers likely struggle to produce the paperwork necessary for other traditional loans.
But Hard Money Lenders like Marquee Funding Group know that this shouldn’t disqualify you from getting a loan.
Unlike banks and other lenders, hard money lenders usually allow you to prove your income with pay stubs.
6. You’ll Need a Plan
Just because hard money lenders are flexible doesn’t mean that you can skate through the approval effortlessly.
The hard money lender needs to know that you have a plan to pay back this loan. Whether that be to sell your current home and pay off your bridge loan, pay it off with a large sum of money you’ve inherited, or even just make extra payments each month.
It’s also a good idea to plan to pay it off quickly. Since hard money lenders are taking on different risks, the interest rate on your loan may be higher than a conventional loan. You also won’t face any prepayment penalty fees.
Once you pay off the initial loan, you can refinance for a new mortgage.
7. Some upfront costs
Hard money lenders all have some sort of requirement for a down payment, but each lender will set their own amount.
This can even vary from loan to loan. If you’ve worked with this lender before, and have a good track record, you might not have as large of a down payment.
Also be sure to check if your hard money lenders require points to be paid, as some do. One point is typically 1% of the loan and some lenders will require 1-2 points to be paid upfront.
Again, these are things that you will need to work out with your lender, but plan to have some savings before you get your hard money loan.
8. Simple Application Process
At least with Marquee Funding Group, you won’t have to jump through hoops or spend hours filling out paperwork.
Simply submit your loan scenario to get the process started. Marquee offers same-day preapprovals and can get you funding in as little as seven days.
In that seven days, you’ll discuss your situation with the lender, go through a quick application and document requesting process, and Marquee will underwrite the loan.
Marquee can give you the edge you need to get your dream home in a competitive market.
Reach out today to see if an owner-occupied hard money loan is right for you.
Photo by Brian Babb on Unsplash