Distressed property buying is the process of buying a home that’s in foreclosure, has been foreclosed on, or is owned by a lender. The market for distressed properties is growing rapidly, as many homeowners are finding themselves unable to afford a mortgage and losing their homes to foreclosure. Distressed property buyers have an opportunity to pick up a great deal on a home and bring it back to its former glory. This is if the home will be turned into a personal residence or if the buyer plans on renovating it and resale. There are many reasons you should consider hard money lending for your next buy; here’s what you need to know:
Benefits of Purchasing Distressed Property
If you’ve come across a distressed property, don’t let the opportunity pass you by. With hard money lending, you can get the money you need to make the purchase and reap the benefits of your investment.
- Fast Approval
- More Attractive Buyer
- Different Loan-to-Value Ratios
- Loan Structuring Possibilities
If you are interested in a loan, but your credit is less than perfect, a distressed property loan may be the answer. These loans are available regardless of your credit score. The property is used as collateral; if you do not make your payments on time, the bank will foreclose on the property. The loan is typically repaid over the years and has a fixed-rate interest rate.
More Attractive Buyer
With distressed property, the list price is typically low for the condition and location. These properties sell fast, and bidding wars are common, so cash is power in this market. With a fix and flip loan, you can have the cash to offer sellers at hand from day one and make an aggressive offer on a distressed property when your competition cannot.
Different Loan-to-Value Ratios
You’re probably wondering how a lender can approve you for more money than you think you’ll need. It all has to do with how hard money lenders calculate LTV ratios. Conventional lenders are bound by federal regulations when figuring out how much they can lend to borrowers, so they use the property’s purchase price or appraised value to determine how much money is available for financing. But private lenders aren’t bound by those rules, which means that they can take on risks that make them much more willing to lend even if your LTV ratio looks high on paper. The result is often funds available for buying a home, making repairs, and paying off other debts until it’s sold again in the future.
Loan Structuring Possibilities
Hard money loans are structured to fit your needs and may include additional funds that exceed your property purchase price into the overall loan for renovation costs or loan payments. Many lenders are willing to provide these loans to borrowers with imperfect credit, so finding one right for you shouldn’t be difficult.