Individuals may have difficulty securing a standard bank loan for the purchase of a new home for a variety of reasons. If you have had to go through bankruptcy, have a history of previous foreclosures or are dealing with less than stellar credit scores, it can feel as though you have been locked out of the real estate market. Even individuals who have good financials can find themselves on the verge of losing a piece of property due to the lengthy approval process for a conventional loan.
Typically utilized by real estate investors and developers, most people don’t know that prospective homeowners can apply for hard money loans for owner-occupied properties as well. If you have dreams of homeownership in the competitive South Florida real estate market, a hard money loan with HML Solutions could be the help you need.
The Lure of South Florida Living
With everything South Florida has to offer, it’s no wonder that people of all ages are flocking there to live. The weather stays in the 70s most of the year, meaning recreational activities rarely need to stop.
Boasting the most extensive coastline in mainland USA, a trip to the beach is never far away. Florida is a mecca for nature lovers as well because it is home to over two hundred state and national parks, forests and preserves. In South Florida alone you can visit the Everglades National Park, Biscayne National Park, Big Cypress National Preserve or the Dry Tortugas National Park in the Florida Keys. Convenient state parks include the John Pennekamp Coral Reef State Park as well as Bill Baggs Cape Florida State Park.
Culture and educational activities are no less convenient with access to art, science, architecture and children’s museums. History lovers can wander the halls and grounds of the 1920s Bonnet House, the Old Fort Lauderdale Village that dates to 1905, the Murphy-Burroughs House circa 1901 or the Edison and Ford Winter Estates in Fort Meyers.
The Challenge of the South Florida Housing Market
If you are planning to make South Florida your home, you will find yourself in a very aggressive housing market. Home sales in South Florida increased by nearly 30% in a single month recently and prices climbed up more than 20%. Sales and prices for multi-family units, condos and townhomes have seen only slightly lower levels of increase, but that shows signs of changing in the near future. There are currently fewer homes on the market than there are potential homeowners. If you are going to secure your dream home in South Florida, you will need to move fast and secure a reliable form of financing quickly.
The Benefits of a Hard Money Loan
Real estate professionals routinely make use of hard money loans because of the unique advantages they offer. With an owner-occupied hard money loan you too can experience benefits such as these:
- Hard money loans rely less on your own personal credit and more on the value of the property you are hoping to buy. This means that even those with credit history challenges can apply and be approved.
- Hard money loans offer more flexibility than standard loans because you won’t be dealing within the strict confines of a traditional lending institution. These loans are acquired through a private lender, such as HML Solutions, which is not constrained by the reams of red tape that are common in a traditional bank.
- You can often get approved for a hard money loan in a week or even less. In a challenging real estate market, that means you can get your financing faster than others interested in the same property, giving your bid the winning edge.
- There are no prepayment penalties with a hard money loan. If you are using the loan as a financial stop-gap to secure a property until you can qualify for conventional funding, you are free to pay off your hard money loan as early as you wish.
The Challenge of Finding the Right Lender
The first task you will need to complete is to locate a lender. One of the reasons you may never have heard about owner-occupied hard money loans is that not every private lender provides this product.
Federal regulations dictate that in order to offer hard money loans to individual homeowners, lending institutions must undergo some highly time-intensive requirements. We must provide extensive documentation as well as obtain supplemental licensure. Additionally, we must adhere to significant government regulations and be willing to accept the great risk inherent in offering this service to our clients. At HML Solutions, we believe that the opportunity to assist more clients with their financing needs makes all of these requirements worth fulfilling.
You also want to be certain that you are dealing with an experienced and capable lender. Unfortunately, there are a handful of pretenders in the world that exist to take advantage of unsuspecting borrowers. Here are a few things to watch for in making your choice:
- What kind of reputation does your potential lender possess? Do your research on this subject. You clearly want to avoid businesses that have a negative reputation, but you also want to be cautious with companies that simply have not made any significant impression on the industry.
- Be cautious with lenders that do not have a clearly defined and robust public presence. You should be able to find out information about the lender easily. They should have a detailed web page that lists a legitimate address and contact information. The HML Solutions website is easily accessible and offers detailed information about who we are, what services we provide and multiple avenues of contact information.
- Be suspicious of lenders that do not require a property evaluation prior to approving you for a loan. Since all hard money loans are based on the value of the property being purchased, a lender who shows no interest in those figures is highly suspect.
- Follow the adage that teaches that anything that seems too good to be true, is most likely false. Lenders that require a large upfront fee should immediately lose your trust. Although there may be initial fees required, they should be minimal and explained to you in detail.
- You should also be wary of lenders who make unreasonable promises such as the intention to fund the entire cost of your property, especially if this promise is dependent on receiving a fee from you. A hard money loan will typically cover up to 70% of your home’s value and the determination of the loan amount should be determined by the property value and the buyer’s financial solvency; it should never be affected by any fee.
- Take note of the interest rate that the lender is offering and be suspicious of unusually low rates. An honest lender will tell you upfront that you should expect interest charges that are higher than a standard loan. Although this will vary and be affected by many factors, the usual interest rate range will rarely be less than 10%. This is due to the increased risk that hard money lenders take on when they give the loan.
The Requirements You Will Need to Fulfill
We are always straightforward in revealing all loan details to our clients with any of our loans. Due to the risks we will take on if offering a hard money loan for your purchase, there are several requirements that you will need to provide:
- You will be required to maintain a set debt-to-income ratio for the duration of the loan which will impact your ability to take on other debt until the hard money loan is repaid.
- You will need to provide proof of income through documentation including W2 statements and tax returns.
- You will need to reveal past and current financial responsibilities such as credit card debt and other loans so that we can assess your financial fitness and ability to meet scheduled payments.
- You will have the responsibility to provide a higher down payment on your home than is typical for a traditional loan. It is usual for applicants for an owner-occupied hard money loan to be asked for a down payment of up to 30% of the purchase price of the home.
- You should be aware that the repayment term for a hard money loan is generally significantly shorter than a standard loan. You will need a plan for repayment in the short term or the possibility of refinancing the loan before the end of its term.
Contact Us Today
The expert agents at HML Solutions are highly trained in all the fine details of owner-occupied hard solution loans. We are prepared to consult with you on your financing needs and to develop a loan program that is suited to your specific situation.
We encourage you to look into our established reputation in the financial industry and to take a moment to read through our website to familiarize yourself with our products and our approach to client relationships. We are confident that you will find our company to be a trusted partner in financing your homeownership dreams.