Who Is A Hard Money And Traditional Loan For?

Hard Money Loans vs. Traditional Loans

There are two major types of loans that you can get when you’re purchasing real estate. These two major types of loans are called conventional and hard money. They both have very two different purposes. A conventional loan is typically for people who are simply trying to purchase a residential or commercial property. Hard money loans are typically for real estate investors and sometimes for people with bad credit. Sometimes people with bad credit can qualify for hard money loans because the standards of lending are different. It isn’t so much based on a person’s credit history but more on their income, ability to pay the mortgage and based on the loan to value of the property. Typically a hard money loan will require 80% loan to value. It is a much easier loan to get. It is also typically much higher in interest so people who are looking for a long-term loan should not depend on a hard money lender. There are some people who will start off with a hard money loan and then transition into a traditional mortgage. You see this happening when people are rehabbing a property and have a plan to remain the owner of it for a very long time.

So, with the information that we have shared it is pretty easy-to-understand who a hard money loan and a traditional loan is for. You probably know by now if one or the other is for you. You might have also discovered when in the cycle of your ownership you should consider either loan type. The thing to remember is that a hard money loan is typically not a long-term loan. The conditions of them do not make it favorable for long-term usage. It is typically expected for a person to flip the property or transition into a traditional loan if they still have a need for someone else’s money.

Before you decide which one is right for you. You should determine what your goals are. You should know what you’re trying to achieve. You should know if you are a person is planning to hang onto a loan for very long time. You should know if you simply are a real estate investor type who is trying to turn a profit and you are using a hard money loan because it is the easiest, quickest, and best loan to get at the time. Short term it might be the cheapest type of loan to carry. It all depends on who you are, what your plans are and the terms of the loan. Either type of loans is great for the right type of person and the right scenario.

So you best plan of action right now is to figure out which loan type is going to be best for you. Which one is going to be cheapest for you. Deciding if you need a short-term loan. Determine if you need a long-term loan. Determine which loan will allow you to achieve your financial goals. Once you have answered all of these questions you be able to easily figure out which type of loan you should get. It really is that simple.

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