The majority of people understand what a conventional mortgage is, but fewer understand what a hard money loan looks like. And, even though you may be familiar with a conventional mortgage, you may not truly understand everything that goes into financing from your bank. In this article we will break down the common differences between the two types of financing.
A difference that seems to stand out more than others is the time frame between the two types of financing and how long each of them take to close. With a conventional mortgage it typically takes around 45 days. The fastest you can close with a conventional mortgage is 30 days—and occasionally up to 90 days. There are many strict rules in place when it comes to the underwriting of a conventional mortgage along with a lot of red tape. With a hard money loan you can close within a week or two. The underwriting of Texas Hard Money Loans are less stringent and more flexible.
The funding sources of conventional mortgages and Texas Hard Money Loans differ, as well. Conventional mortgages are funded by lenders who sell their loans to larger banks and other investors. The money for Texas Hard Money Loans comes from private investors, investment funds and lines of credit. Texas Hard Money Loans are not sold to anyone else as conventional mortgages commonly are. These loans remain with the original lender.
Now, the money-interest rates. Yes, generally Texas Hard Money Loans have a higher interest rate than conventional mortgages. There is a reason behind the madness, though. Arizona Hard Money Lenders are loaning money for much shorter periods of time unlike banks who collect large amounts of smaller interest payments over time. Yes! That is the only difference when it comes to interest rates. You may have a hard money loan at an interest rate of 9%, but it’s only for six months—while your conventional mortgage sits at 4% and the bank collects that interest for 30 years.
Bank lenders offering conventional mortgages are lending them on residential properties that will be used as the borrower’s home. The banks are looking at the borrower’s credit and condition of the property. If a property needs rehabbed in any shape or form they will generally not be approved for a conventional mortgage. Arizona Hard Money Lenders, on the other hand, lend to both residential and commercial properties, but usually don’t lend on primary residences. Texas Hard Money Loans are set up for investors looking to fix and flip properties.
Lenders are as unique as borrowers are. We would love to share our knowledge with you and find out if we can work together. Please contact us at level4funding.com.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.