Among the many unique aspects of hard money lending is unparalleled speed. Where conventional lenders can take weeks, if not months, to process and fund a loan, hard money lenders can do the same thing in a fraction of the time. But how quickly can they do it? That depends on the lender.
Hard money lenders all have their own ways of doing things. They can work faster than banks and credit unions because they do not have to go through the same verification and underwriting procedures. It is not uncommon for a hard money loan to be approved within days. How quickly funding can be arranged boils down to scheduling an appraisal and then making arrangements with the title company.
In As Little As One Business Day
Although one business day is not the norm with hard money loans, it is possible. Salt Lake City’s Actium Partners has been known to approve and fund loans that quickly when necessary. Actium services clients in Utah, Colorado, and Idaho.
They once got a call from a desperate borrower whose bank backed out on a Friday morning. The borrower was a real estate investor scheduled to close on an apartment property the following Monday. If he couldn’t close on time, he would lose the deal.
Actium spoke to the borrower over the phone. They sent an appraiser out to look at the property that afternoon. Before the close of business, the loan had been approved and paperwork was being prepared. Actium staff sent both funding and paperwork to the title company on Monday morning. The deal was saved and that was that.
How They Do It so Quickly
Knowing what Actium Partners can do really makes you wonder why banks cannot operate more quickly. It boils down to several things, including regulations and policies. Conventional lenders are governed by one set of rules while private lenders are governed by another.
A bank or credit union is required by law to prove a borrower’s creditworthiness by looking into nearly every aspect of their finances. And if it is a business looking to borrow, all the company’s finances need to be investigated as well. Conventional lenders do not have any other choice.
In addition, underwriting practices are a lot more complex in the conventional market. That is why loan officers are continually asking for additional documentation. It is why paperwork is shuffled from one desk to another until half a dozen people are involved. Things are a lot different in hard money.
Hard money lenders base approval on asset value. In other words, borrowers put up collateral to back the loans they seek. This frees lenders from having to prove borrower creditworthiness. If the asset can cover the loan. It’s good. Likewise, the underwriting process is much more efficient because so little paperwork is involved.
Why Real Estate Investors Appreciate Hard Money
If you haven’t figured it out by now, speed is why real estate investors appreciate hard money as much as they do. In the real estate game, speed is everything. Investors need to be able to close deals quickly or risk losing them. They cannot afford to wait around for underwriters and loan officers to do what they do.
The speed at which a hard money loan can be approved varies among lenders. But in almost every case, a hard money lender does not need nearly as much time as a bank. Hard money loans are approved and funded in a fraction of the time. Without complicated approval and underwriting processes, hard money lenders can work much faster.
