PRIVATE/HARD MONEY LOAN PROGRAMS

Hard money loans differ from the "soft money" loans given by financial institutions. Soft money loans are the average 20 or 30-year mortgages provided by banks. Qualification for soft money revolves around the creditworthiness of the buyer(s). Generally, the applicant's credit score, income, and financial stability determine the interest rate and loan amount. Soft money loans are often pre-approved for a certain amount based on the borrower's financial history, leaving the borrower free to choose between a variety of properties that fit the loan parameters.

By contrast, hard money is based on the property it is leant on. The loan applies only to that specific property. In most cases, the borrower's income and credit history have no bearing on loan approval. A hard money loan also has fast approval times, often as little as 24 hours. Soft money loans may take 30 days or more for approval.

Hard money is approved much faster because qualification is straightforward. The primary criteria is the equity in the property. Generally, hard money loans are for up to 70 percent of the after repaired value (ARP). ARP is used because hard money is often used to fix up properties that need substantial work.

Hard money loans are for much less than the full value of the property because the loan comes from private individuals instead of banks and borrower credit history has no bearing.