If you’re interested in real estate investing, you may have heard the term “hard money loan” thrown around. But what exactly is a hard money loan, and when is it a good option for your real estate business? Here are some key points to keep in mind when considering a hard money loan in Houston.

1. Hard money loans provide capital for real estate projects. One of the primary benefits of a hard money loan is that it provides quick access to capital for real estate projects. These loans can be closed in a matter of days which can be helpful when trying to get the interest of a potential seller.

2. Hard money can provide very aggressive leverage for investors with some loans offering up to 100% of the entire cost of the project including closing costs. This feature alone makes hard money extremely attractive to real estate investors who are able to find property at a discount.

3. Hard money loans are often used for fix and flip projects or properties that have some sort of construction/renovation aspect to them. Long-term conventional lenders do not typically lend on renovation projects for investors and hard money loans fulfill that gap.  

4. Creditworthiness is typically not a huge factor when obtaining a hard money loan. Depending on whether the home will be “flipped” or refinanced is the deciding factor on heavily credit is weighed. If a flip, hard money loans are based primarily on the value of the property being used as collateral. However if the investor will be keeping the home as a rental property then credit is more important as they will need to be able to qualify with the long-term lender once the property has been renovated.  

5. Hard money loans have shorter terms than traditional mortgage loans, typically 6-12 months. These loans are intended for properties that will be renovated and then sold/refinanced therefore it’s important to have a solid exit strategy from the start.

6. Interest rates are higher on hard money than traditional loans because they are based primarily on the value of the property and because they have shorter terms. It’s important to weigh the additional cost of the loan when determining the return on investment to ensure that the project is still viable.  

7. Finally, it’s important to be committed to your real estate project before pursuing a hard money loan. Because hard money loans can be obtained quickly and without extensive credit considerations, it can be tempting to jump in without fully considering the scope of the project. It’s important to carefully evaluate the property and the housing market in the area to ensure that you have a solid plan for making a profit. 

If you’re considering a hard money loan in Houston, Noble Mortgage can help. We provide hard money loans for real estate investors throughout the Houston, Dallas, San Antonio and Austin areas. Contact us today to learn more and see if a hard money loan is right for you.