When investing in Real Estate, a lot of times you have to close on a property very quickly. “Closing” in terms of real estate means the final transaction or the “settlement” of a real estate transaction between a seller and a buyer. As a real estate investor, you purchase a distressed property from a seller, then you repair the property, then you resell it or rent it out to make a profit. Closing is the last step after agreeing to purchase a property. This is where money is exchanged, taxes are paid, and all fees associated with the sale is paid. Usually, the seller of a property is selling their home for a discounted price not only because they need the money, but they need it FAST. Hard money lenders are able to give you the funds needed to purchase a property very quickly so that you can go to closing usually within 14 to 30 days after agreement to the seller of that property.
Another reason why investors use Hard Money Loans is because of the ease of obtaining the loan. All hard money lenders have their own terms and requirements on lending Hard Money. Some Hard Money lenders might check your credit score and may turn you down for a loan if your credit history and FICO score does not meet their standards. Then again, there are other Hard Money Lenders that might only pull your credit history just to check for repossessions, bankruptcies, or short sales. You could possibly have the worst credit history in the world, but if you have a “Great Deal” you will most likely get approved for the loan. Some lenders will not pull even your credit history, and only look at the numbers in the property and how much of a profit will be made in the end. If you usually get turned down for even the smallest loans at a bank or other financial institutions, you can very well obtain a $500,000 loan from a Hard Money lender if you are projected to make a big enough profit after repairs are made to the property. It really all depends on the particular lender and the specifics of the deal.