Whether you’ve been through a foreclosure in the recent past or want to buy an unconventional property to turn into a dream home, finding financing can be a real struggle. Even qualified borrowers can find it difficult to secure the loans that they need in order to buy residential properties in today’s market, particularly in places like California. For investors and borrowers who don’t meet conventional lending requirements, finding financing might even seem impossible. Thankfully, residential hard money loans are a viable option for residential buyers with unique needs.

Residential Hard Money Loans 101

Residential hard money loans, also known as equity-based or private money loans, have long been used by real estate investors who want to purchase properties traditional lending institutions won’t finance. However, residential hard money loans can also be used by buyers who want to purchase homes or investment properties. These types of loans offer terms that some new real estate investors may not be used to, but it’s important to remember that buying property is a great way to build personal wealth.

Why Use Residential Hard Money Loans?

Residential hard money loans can be used in a wide variety of buying situations. Some believe that residential hard money loans are only for those with poor credit, but that simply isn’t true. While private money loans are often a good option for buyers with damaged credit histories. Here are 5 examples of how residential hard money loans are used:

  • Residential Hard Money Example #1: Homes don’t meet the requirements of FHA lenders.
  • Residential Hard Money Example #2: Buyers want to turn non-conventional properties into homes.
  • Residential Hard Money Example #3: Traditional lenders are unable or unwilling to finance fix and flip loans.
  • Residential Hard Money Example #4: Buyers have a mortgage on another residence.
  • Residential Hard Money Example #5: Buyers need to finance purchases quickly.

Who Uses Residential Hard Money Loans?

Because they offer such flexibility, residential hard money loans are utilized by many different types of borrowers. Many real estate investors who opt for these types of loans do so because they find investment properties that they want to buy and don’t have time to wait for approvals through traditional financing institutions. Other investors opt for residential hard money loans because they want to buy properties that must be rehabbed or are viewed as high risk by lenders due to their location or use history. Individuals who have been through foreclosure or bankruptcy may also be able to use residential hard money loans to purchase their primary residence or investment property.

Buyers who are considering using residential hard money loans enjoy options that traditional lending institutions don’t offer. Whether you want to buy a distressed property or want to get back on track after a foreclosure, a residential hard money loan might be a good choice. With careful, advanced planning, private financing from a residential hard money lender can provide for an excellent return on investment.