Hard Money vs Bank Loans

Oakland Hard Money Lenders

Hard money is a type of financing used to finance properties for a very short-term like 6 months or a year.  Hard money-lenders use much different terms than a traditional bank.  The first thing you will notice when you finance with hard money lenders is they charge a very high interest rate.  Most hard money-lenders are charging 14 to 16 percent and points for their money.  Points are a percentage of the total loan and can add costs quickly when a hard money-lender is charging 2, 3 or even 4 points on a loan. Hard money loans are very different from bank loans. Following is side by side comparisons in order to understand hard money and bank loans. The list shows parties, terms and conditions, and processes in common and compared in relations to each other.

Hard Money Loans	Bank Loans
It is usually funded by single private investor or pool of funds they are managing	These loans are funded by bank money or the third party institutions
Funded by hard money lenders	Usually funded by an employee of a bank (loan officer), mortgage broker or banker who originates loans. Licensing requirements may vary; it depends on type of institution and their state licensing.
Hard money loans are customized to borrower’s needs and based on loan and collateral criteria i.e. LTV and DTI. It is more flexible and faster than Conventional.	Program is set as per government agencies like Fannie Mae, Freddie Mac, FHA, VA, USDA, State Housing Agency, and some in-house “portfolio” lending programs.
Credit scores of borrowers are considered but not the primary factor.  Each investor has his own criteria.  Hard money lenders will look at the collateral and borrower ability to pay.	Credit scores are the primary factor in the loan decision making process.  Minimum credit scores are crucial
Loan servicer is the private money lender who originated the loan, or a servicing company.	Loan servicer is the institution who initially originated the loan.  Very likely, one institution will sell the servicing rights to a larger firm who specializes in servicing.
Closing costs can be as much as 3-10%, depending on the loan amount.  It also varies on the quality of the loan package	Closing costs 1-2% of the total loan amount.
Interest rates are high, typically start at 10% and go up based on unique criteria of each loan and investors vary greatly.	Interest rates are competitive among all lenders, and lower than hard money lending rate.

Oakland hard money lenders offer many services that the banks cannot or will not. They approve loans quicker than banks and other traditional lending services. They understand the needs of the investor, since most of them have invested in real estate, and don’t count credit score as banks do. Some of them are even considered specialists, a good choice for the rehabber or reseller. The fees that they charge are reasonable, for the most part.

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