Purchasing residential properties can be competitive in Florida, and some buyesr may need to secure funding for a purchase as fast they can. Many real estate investors go to hard money lenders for bridge loans that can be taken out while they are waiting to be approved for loans with more favorable terms.
Hard money lenders provide loans quickly with high interest rates. Unlike traditional lenders, hard money lenders are not focused on the borrower's creditworthiness and income. Instead, hard money lenders look at the property that the borrower is purchasing to determine whether it is valuable enough to pay off the loan if the borrower defaults. While banks usually lend 80 to 90 percent of a home's value, a hard money lender will only lend between 50 and 70 percent of a home's value.
A hard money lender that is considering a home loan application will assess the home's market value, not its purchase price. After evaluating the broker's price opinion, tax assessment records and a professional appraisal, the lender will make a best guess about what the property could be sold for. Hard money lenders will also want information about the borrower's plans for fixing up the property.
People who are interested in purchasing residential real estate as an investment may want to talk to an attorney about the properties that they are looking at. An attorney may be able to help a buyer to determine whether a property has investment potential and look for any title issues with the property.