A hard money loan is a unique type of loan in which funds are secured by real estate rather than the homeowner’s credit history or debt-to-income ratio.

Comparable to bridge loans, hard money lenders primarily focus on real estate. These lenders can be either individuals or private money lenders since banks and credit unions usually do not offer such programs. Hard money equity loans typically have a duration of 12 to 60 months and are often utilized as a means to obtain quick cash.

For instance, if you are contemplating purchasing a new home, but your current home remains unsold and languishing on the market, you might consider taking out a hard money equity loan. In this particular situation, a hard money bridge loan could serve as a means to access your home’s equity, allowing you to use those funds as a down payment on your new property. Furthermore, hard money loans are commonly utilized for other purposes, such as acquiring investment properties or infusing capital into small businesses with a hard money mortgage specifically for self-employed individuals.

One key distinction between hard money loans and other mortgage loan types, like conventional loans, lies in the fact that your home serves as collateral. Consequently, hard money lenders primarily focus on the equity, condition, and location of the property in question. As a result, borrowers with less-than-perfect credit histories will find it easier to obtain approval for hard money loans tailored for bad credit, since their credit scores don’t play a significant role in the underwriting process. In situations where you require funds promptly, hard money loans offer a more streamlined approval process with minimal paperwork, ultimately granting swift access to your real estate equity for immediate cash needs.