As an investor, you want to be aware of which factors impact hard money lending in Houston. Traditional banks often alter their rates based on federal interest rates; do federal rates also affect hard money lending in Houston?
The answer is no—changes to federal interest rates rarely affect hard money loans. These lenders consider other factors when determining your loan rates. Your private money lender in Houston bases your hard money loan on the strength of the deal, which is why investors with lower credit scores can often still get a hard money loan in Houston.
A Typical Hard Money Loan
Hard money lending in Houston usually includes more risk for your lender than a traditional mortgage, which is why rates are often higher than other property loans. There are many benefits to using hard money for real estate investments. Closing times are generally quite short, hard money loans come in cash, and private money lenders are more willing to lend to borrowers with poor credit or multiple other loans. Though each loan will be different, these are average ranges for a hard money loan in Houston:
- Rates often range from 7.5% to 15%
- Terms are usually between 3 months and 3 years
- Points vary from 2% to 10%
- Closing times are often 10-15 days
- Down payments are typically minimum of 10% of the loan to value ratio, or 25% of the after-renovation value
Depending on the deal, these elements can all change, since hard money lending in Houston is based more on the property you intend to buy. Let’s look more closely at the factors that lenders consider when determining the details of your hard money loan.
What Affects Hard Money Lending in Houston?
Your lender looks at several things to find a deal that works best for everyone. These include:
Exit Strategy
Your exit strategy can impact your hard money rates. This is because tells your lender how long their money will be at risk and how high the risk is. Your private money lender in Houston will likely ask you about your exit strategy and how you plan to pay back your loan. This can affect your hard money deal.
Loan to Value Ratio
Another component of your hard money loan is the loan to value, or LTV, ratio. The lower your LTV, the less risk for a lender. Thus, the LTV ratio significantly influences your loan approval and rates.
Location
Hard money lending in Houston can also take location into account. Many national lenders consider whether a property is in a mortgage state or a deed of trust state. Hard money rates in Texas may be lower compared to elsewhere because lenders can foreclose on properties if you don’t pay back your loan. Other geographical factors also play a role in your hard money loan rates, like how many lenders are in your area; rates tend to be lower in areas where there is more lender competition.
Get a Fast Loan for Your Property Investment
Hard money lending in Houston depends on the strength of your potential property and how much risk is associated with the real estate. This means that personal history doesn’t factor into their loan rates as much as traditional financing. Working with a reputable and experienced hard money lender can help you invest in the real estate you want, even if you have poor credit or multiple loans.
If you are considering a hard money loan in Houston, the team at Texas Funding can help. We specialize in hard money lending for all types of real estate investment. We are a proudly local lending firm with solutions that can help you invest in real estate. Contact us now learn more. We’ll work with you to find the best loan arrangements for your needs.