Many people are interested in purchasing their own home, but do not have good enough credit to qualify for a loan. It can be devastating to find the perfect home only to be told you do not qualify for the loan you need. This is where hard money loans for real estate come in. These loans allow people with poor credit to have the opportunity to purchase a home. Though they are much more expensive than conventional loans, which are financed through mortgage lenders, they offer the borrower the ability to own a home while building and/or establishing their credit.
Hard money loans differ from traditional mortgage loans. They are provided by individuals or small groups, and not provided by banks. If the lender is local, the funds can be accessed in a few days. The lender bases the loan on the property's value rather than your credit score. This allows you to get the money you need for the property you are purchasing even if your credit score is poor.
The downside to these loans is that they are typically much more expensive than traditional mortgage loans. There are, however, other ways to use this loan that are not as expensive. These loans, which banks call bridge loans, can be combined with traditional mortgage loans. They are called bridge hard money loans Austin Texas because they "bridge the gap" for those who do not qualify for a traditional mortgage loan and allow them to get financing. When bridge loans and mortgage loans are combined it is called seller carry back financing.
Seller carry back financing helps the borrower to obtain a home, even with poor credit, rebuild this credit, and then change to a traditional mortgage in order to escape any additional high expenses of a hard money loan. In these types of financing, the buyer and seller each have a mortgage on the home. For example, if a home is listed at $300,000 with a carry back offer of 40 percent financing, the buyer would get a loan for $180,000 from the bank and the seller would have a loan of $120,000. These loans are limited to a maximum of 70 percent of the value of the property. The interest applied to bridge loans is also much higher than traditional mortgage loans. In addition, sellers can increase their interest rates if the buyer does not make proper payments, leading to a foreclosure of the home. So, make sure you are capable of making these monthly payments before deciding on this type of loan. Read http://money.cnn.com/real_estate/continued.html for news concerning real estate issues.
Obtaining a hard money loan or a seller carry back loan can be beneficial to those who have bad credit and want to buy a house. Make sure you research these types of loans and different lenders before borrowing. There are many hard money lenders Houston Texas out there, all of whom have different interest rates and options available. If you are looking into buying a house and don't have the proper credit, consider a hard money loan.