There are various types of hard money land loans. They are classified based on the purpose of the loan. Some of these are commercial, construction, bridge, land acquisition, development and residential. The term hard money refers to the difficulty in acquiring such a loan.
Land is necessary for any construction or real estate development. Most conventional lenders such as banks, savings and loan association and pension funds are not interested in giving such loans. Developers therefore approach loans specialists who are able to find investors to make these difficult loans.
Hard money land loan lenders are, one such group of specialists who can find money for, short-term land development loans. They usually offer loans for a smaller percentage, of value than conventional lenders. Additionally, their loan terms are usually worse than conventional lenders.
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Typically hard money land loan lenders will only loan liquidation values of the land parcel. These lending sources have higher interest rates and shorter loan terms. Most hard money land loan lenders who make raw land loans place them with private money sources. They will make loan decisions based on asset value rather than the borrowers$%: credentials. This makes these loans easier to get but harder to service.
Since raw land deals are often time sensitive, the hard money land loan lenders, are used to making fast underwriting decisions. They quickly qualify the borrowers and ensure that, they have the capital required and then provide their decisions within one or two business days.
Borrowers approaching hard money land loan lenders are required to follow strict guidelines set by the lenders. Some lenders will not finance a purchase of, foreclosed properties or properties encumbered by liens or judgments. Borrowers typically use brokers, to navigate through the list of restrictions in order to find, the best hard money land loan lender. Hard money land loan lenders are frequently used, when the risk is higher, but there is adequate collateral to cover these higher risks.
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