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How to Leverage Hard Money in a Competitive Real Estate Market

The market is tricky right now for a home buyer. With inflation and mortgages to consider, it may be daunting to try and dive headfirst into home buying. First-time homeowners especially may be tentative to try their hand at real estate, especially without guidance or leverage. No matter the market type, hard money loans can be your tool for cinching the property of your dreams. By knowing what to expect, looking at your own qualifications, and finding guidance in terms of market price, a hard money loan can be your leverage to securing your first home.


Hard Money, Big Value


If you are familiar with hard money loans, you know that they are typically used in the real estate market to buy distressed properties in need of renovation. As house flipping soared in popularity, this became a more frequent way to invest in real estate development no matter your financial background. Today, it provides not only an opening for house flippers, but can be used to secure owner-occupied and commercial properties as well. A few distinct characteristics separate hard money from the rest.


Hard Money Things to Note


There are a few qualities about hard money loans that are important for first-time home buyers to be aware of, both positive for the buyer and things to consider. Here is a list of the top qualities to note:

  • Financial Background Check: One of the positive qualities for the buyer surrounding hard money is the fact that it does not rely on a person’s financial history to secure the loan. Hard money takes the property as hard collateral itself, which means that there is less pressure on the person’s own financial background. This being said, it is better to have a positive credit history than not, so working on building it for the hard money loan is an important step.

  • Quick Approval Process: One of the hardest pieces in the loan process for home buyers is the approval turnaround period. In a competitive market, the months you often have to wait to be approved means the property is out of reach. With hard money loans, you can often be approved within days, giving you leverage time for the property.

  • Higher Interest Rates: With shortened approval processes and more accessible loans, lenders take higher risks with their buyers. This reflects in the loan interest rate, which is normally higher than a conventional loan. However, current hard money rates hover around 8.5 – 9.00%. This is in comparison to the 5.75% conventional loan interest rate, making it a feasible comparison for new buyers.


Leveraging your Hard Money Loan in a Competitive Market

Now that we have highlighted some important aspects of the hard money loan, let’s consider how a buyer may utilize this loan form to their advantage.

  • Increased Cash Flow: Hard money loans allow potential home buyers to free up cash to place towards a down payment. Oftentimes, these cash offers will look attractive to realtors, and even in some cases open up new possibilities for homes to purchase.
  • Interest Rate Payments: While you are utilizing a hard money loan, the only thing a lender needs to pay off during the loan cycle is the accrued interest. With a steady financing plan, this can be a valuable tool for home renovations or other incurred costs during the buying process.

Loaner Guidance: Depending on the avenue, hard money loans can also be a way to receive guidance in the field while investing in your own property. Lending companies such as JMJ, which has been operating for over 28 years, match qualified borrowers with real estate investors. This makes the loaning process safe and secure for future home borrowers. With expert advice and financial planning, trusting funding groups such as JMJ Funding can be your ticket to securing your next property.

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