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   HARD MONEY LOANS

Bank Loan vs. Commercial Hard Money Loans


paperfree Aditi Bansal 29:14
Published on Tuesday, April 25, 2017

Bank loans are quite different from hard money loans. To understand better the difference between bank loans and commercial hard money loans, you need to compare the two sides. Here are some comparisons between the two.

tags  #Hard money loans  #Bank lending #Mortgage broker

 

The main reason why many people prefer borrowing loans from banks is that of the loan that they can get approved for.

How bank loans and commercial hard money loans differ.

  • The bank agents must hang their license with a broker and should be licensed by their states and registered federally as a mortgage loan originator, while in hard money lending the terms are hardly used unless in the sale of a real estate is involved as part of the loan operation.
  • The mortgage brokers should be licensed as real estate broker. The same case applies to hard money lenders.
  • The loan officer is usually an employee in the bank, a large commercial hard money lender who creates loans or a mortgage broker. The qualification of a license depends on the type of institution and their federal and state permitting. In commercial hard money lending, the term is not used.
  • In bank loans, a loan broker is also a mortgage broker while in hard money lending; he is a qualified agent who focuses in negotiating commercial hard money loans.
  • A mortgage broker works with third parties to find conventional loans for you while the hard money lenders rarely use brokers because they offer their own loan product.
  • Mortgage bankers fund with their own money and work with a third party institution to fund loans or through a pre-arranged line of credit. In hard money lending, the mortgage bankers support with their own resources and, manage a large amount of funds or line of credit.
  • In bank loans, their programs are set on government organizations such as Fannie Mae, Freddie Mac, USDA, VA, FHA, State Housing Agency, and some in-house portfolio lending programs. In commercial hard money loans, there are few sets of programs which are modified to borrowers needs based on the local standards such as DTI and LTV. They are more flexible and faster than bank loans.
  • Bank lenders will need good credit with easily recognized income sources. Hard money lending accepts non-tradition and self-employed sources. The incomes are scrutinized differently.
  • Appropriate property types for a bank loan are single family homes and some commercial properties. In commercial hard money loans, the worthy property types are the others that fall outside the bank parameter, for instance, rehab loans, land loans, bridge loans among others.
  • The interest rates are basically competitive between all lenders. However, the bank lending has a lower rate. Interest rates in commercial hard money loans start at 8% and can rise based on the loan standards and the investors.
  • A personal guaranty is required in both types of loans. However, in commercial hard money loans, it is negotiable based on the collateral for the loan.
  • In bank loan, an escrow company oversees the execution of closing documents, distributions of funds, and the recording of documents at the counties office. On the other hand, a hard money lender personally handles all the signing of loan papers and accompanies you to the escrow to supervise the closing.
  • In bank lending, underwriting is mostly done in two steps. The computerized underwriting software choice and then a worker of the mortgage company, bank or a government agency or a mortgage insurance company determines the outcome. In hard money lenders, underwriting is based on the experiences of the lender, concerning the loan and the collateral offered.


This page with a focus on Hard money loans, Bank lending was shared by Aditi Bansal.

 
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