The Houston real estate market waits for no one. Because of the high demand, it is essential to understand how to secure a hard money loan quickly for fast-turnaround deals and investments. Conventional bank loans can take months to be processed, making hard money loans an ideal solution for winning a bid in Houston on short notice. At Texas Funding, we strive to help our clients pursue their goals by offering the opportunity to enter into a hard money loan agreement. By alleviating the time wasted waiting for a conventional loan, you can reach new heights and go after bigger, better opportunities.
Unlike traditional financing agreements, hard money loans are asset-based, instead of relying on credit scores and debt-to-income ratios. This allows our team to quickly approve and negotiate terms, rather than waiting months for reports to come through. What truly makes hard money loans an asset to your Houston real estate ventures is their flexibility in terms of rates and timelines. At Texas Funding, we work with you to find the perfect financial solution for your unique goals. This blog will help you understand the step-by-step process of acquiring a hard money loan in Houston and how it can impact your financial goals.
Phase 1: Understanding Texas Hard Money Loans and The Fine Print
While understanding the importance of hard money loans in Houston is the very first step, recognizing the requirements is also essential. The non-negotiables for entering a loan agreement may seem strict, but by understanding the unique risks and legal parameters involved, you can further set your experience up for success.
The most important thing to remember is that hard money loans are strictly only for business or investment properties, not homesteads or primary residences. This is because of Texas’s unique homesteading laws that safeguard properties in the event of a broken agreement. Sometimes, you may even need to create an LLC or borrowing entity in order to apply for a hard money loan to ensure that it is completely separate from a residential agreement.
At Texas Funding or any Houston hard money lending agency, the lender’s main priority will be understanding your exit plan. This typically needs a fix-and-flip situation or a fix-and-rent agreement. The specific type of exit plan, or how you plan on executing the loan agreement, can impact how your lender will underwrite the loan. Typically, however viable and strong your plan is, the better.
Phase 2: Preparing Your Perfect Hard Money Loan Package
If your biggest priority is acquiring your hard money loan as quickly as possible, making your loan package flawless and precise is essential. This allows our team to do their job faster and more accurately, creating the ideal plan for your loan. To get this package right the first time, your package must include what many lenders call the three C’s:
- Credit and Capacity
- Collateral
- Construction
Credit and Capacity: Your Experience and Liquidity As a Borrower
Hard money loans are asset-based, so showing your lender the full story is essential to securing your loan quickly. By providing key details about your financial experience and liquidity, you can build confidence in your capacity and commitment to completing the loan agreement. Here is the typical checklist for this section of your financial package and building trust in your liquidity:
- Borrower profile and resume: This could include things such as past successful projects and investments.
- Financial documentation: Entity information, personal financial statements, and bank statements are all necessary assets to demonstrate your liquidity and secure down payments.
- Credit check: While still less stringent than typical bank loans, hard money loans still require baseline credit checks to establish if there is any considerable hazard. In most cases, a 680+ score is required for the most flexible terms.
Determining Collateral Property For Your Money Loan
When it comes to asset-based lending, the property that will serve as your collateral is the single most important risk mitigator for your lending team at Texas Funding in Houston. Within this section of your package, the main goal is to prove that you are entirely in ownership of the property, and that it is a verifiable asset based on condition and profit potential.
Things that could prove this include a signed purchase contract. Not only will this help prove ownership, but it will also typically include the acquisition prices, which can help verify the asset’s value.
Additionally, including current and detailed property photos and videos can help convey the condition of the property, which can play a key role in establishing its market value and how your loan could be structured. Lastly, this portion of your package needs to include a preliminary title report and proof of hazard insurance quotes.
Funding the Vision: How Construction Impacts Your Hard Money Lending
Regardless of your plan for your property, providing your lender with confidence in your fix-and-flip or major construction project is vital. By providing the following information with complete precision, you can help unlock your loan’s potential and allow us to design a hard money loan structure that is perfect for your upcoming construction project:
- Detailed line-item budget: This is especially necessary for large-scale renovation projects. Itemization is also imperative for maximum detail.
- Scope of work narrative: By including a detailed description of the repairs your project needs, as well as the timeline, you can help give your lender much more clarity in what your project will look like down the line.
- Contractor bids: This is not required at Texas Funding, but it is a great piece of supportive evidence for budget validation and increased confidence-building.
Phase 3: Finalizing Your Hard Money Deal in Houston
Now that you’ve finalized your hard money loan package, working with a great lending partner like Texas Funds in Houston is the most important step for finding the perfect loan solution. Our team specializes in Houston real estate lending; because of this, you can rest easy knowing that we understand the struggles and challenges associated with construction projects. This specialized knowledge makes us not just a lending entity that you communicate with through a screen, but a tailored and communicative partner throughout your entire hard money loan experience.
This final step includes reviewing and finalizing all aspects of your agreement – from the interest rate to the loan terms. Additionally, we can restructure your draw schedules depending on your construction project’s timeline. Sometimes, construction projects can be held up by inspections or city regulations. Because of this, working with Texas Funding can offer the flexibility you need to bridge capital gaps during these waiting periods.
Finding Hard Money Loan Speed and Success With Texas Funding
At Texas Funding, we help negotiate and plan a hard money loan agreement with you, but more importantly, for you. This allows you to find a payment schedule and interest rate that work for you and your unique project, rather than typical bank institution loans that can be stringent and slow to negotiate. We look at the big picture rather than the fine details, making us an ideal lending company for your upcoming project. Contact us today for a free hard money loan consultation for your upcoming Houston real estate project!