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Understanding Hard Money Loans

Definition

A “hard money” loan is any loan secured by an asset. The huge majority of these loans are intended for a real estate purchase or refinance. They are not required to conform to Fannie Mae or Freddy Mac guidelines. Loans that are required to follow those guidelines are referred to as conventional loans.

 

Why do people  choose “Hard Money” loans?

Many borrowers do not qualify for conventional loans based on the guidelines referred to above. Whether the borrower is self-employed, does not have a FICO score or is a foreign national, there are many reasons why borrowers do not qualify for conventional loans.

Those who do not have two options, what is known as a non-QM loan or a “hard money loan”.

A non-QM loan, or nonqualified mortgage, is somewhere between a conventional and “hard money” loan. They do conform to many Fannie and Freddy guidelines but they do NOT conform to consumer protection provisions under the Dodd-Frank Act.

Irregular income, debt-to-income ratio DTI) above the conforming limit of 43% and jumbo loan amounts over the conforming limits are all reasons why borrowers might choose a non-QM or “hard money” loan.

 

Working with Hard Money West

Fortunately, at Hard Money West, we are experts at helping borrowers determine which of the three loan types are right for them. We are licensed and able to offer conventional, non-QM and “hard money” loans. Many of our clients have used all three of these mortgage products to achieve their financial goals and we’re happy to help you do the same.

 

If you would like help determining which loan makes the most sense for your particular situation, please get a fast, free quote now.