Magazine

   HARD MONEY LOANS

Next generation of hard money lending


paperfree Aditi Bansal 29:14
Published on Thursday, May 04, 2017

Innovation in hard-money lending is changing the financial industry, creating more opportunities for investors.

tags  #Next Gen Hard money loans  #Hard Money Lending #Online Opportunities

 

In recent years, customers have had more access to hard-money lending services and products. The sudden increase is mainly in response to market demands after mainstream financing started implementing stringent laws. Every economic cycle brings in new changes that influence the interest rates and the credit risks in hard-money lending. As hard-money lending grows, it is more appropriate to classify it as ‘alternative equity financing’.

The U.S. Market

Contrary to claims by some investors, the U.S. real estate market is quite solid, with several financing options. According to a 2014 survey by the Demographia International Housing Affordability study that covered 360 markets globally, 84 out of the 95 affordable markets were in the U.S.

Admittedly, some factors will remain constant. For example, houses in desirable locations will enjoy high prices and higher appreciation rates, and migration towards the southwest and the southeast will keep growing. In a global context, investors in the U.S. have a harder time finding affordable options. The best alternative is to find fast and easy accommodation financial service providers.

Online Opportunities

The growth of the internet has made access to alternative financing options easier. Clients can easily find and contact money lenders.
Financial service providers also use the internet to increase transaction speeds. There is more efficiency in qualifying, assessing and approving credit requests. Lenders can also receive appraisals, bank statements, tax returns, and rent ranges faster, reducing the time needed for each transaction.

While there is still a lot to do, things are moving in the right direction. In the future, mortgage processing will move at the speed of the client.

Government Financing

The dominance of Fannie Mae and Freddie Mac is slowly reducing. Financing options through government-sponsored enterprises (GSE’s) are slowly reducing due factors such as collateral limitations, loan limits, tighter regulations among other factors.

However, there is still a demand for financing and dormant market leaders are starting to slow down. This causes an increase in the demand for alternative financing options, and funding options are increasing supply to meet changing needs.

Changes in federal housing opportunities will increase the need and opportunity for alternative financing. Claims that the capital markets will re-enter the market strongly have no strong basis; however, the industry is starting to experience increased liquidity.

Increasing Landlords

In the aftermath of the housing crisis, there are different opportunities available in real estate. Investors can find cheaper property options, which often need rehabilitation. This creates opportunities especially in an environment where there is more stability in the market and an increase in value for houses.

Interestingly, more landlords are adding properties to their portfolio, with investors who were on the sidelines making bold moves into the market. The new property owners now have information on what it takes to succeed. They can comfortably meet rental demands by simply investing in real estate.

Alternative Valuing

Hard-money lenders now use innovative ways to value properties. The BPO, brokers price opinion, helps them settle on a valuing process. The BPO is highly applicable in situations where the mortgage company and the lender agree that valuation processes and expenses are not necessary. The BPO, from a licensed broker, provides comprehensive neighborhood analysis, comparison with similar properties and regional/local market information. Through BPOs, investors can understand their risks easily.

The innovation and entrepreneurial spirit in real estate and alternative financing are inspiring. It is interesting to see how regulatory changes and protocols will influence hard-money lending so that it is no longer the last resort.



This page with a focus on Next Gen Hard money loans, Hard Money Lending was shared by Aditi Bansal.

 
Share this:


Up next

   Hard Money