What I know about hard money leaves me amazed every time I hear a story about how a lender came through to help a borrower in need. The main factor in most of these stories is speed. Needless to say, hard money lenders work quickly. It makes me wonder how different things would be if every financial service were as fast as hard money.
Days Rather Than Months
If you are not familiar with hard money lending, you might be wondering how fast is fast for this particular form of private lending. Think days instead of months. Yes, hard money is that fast.
Actium Lending is a Utah hard money lender based in Salt Lake City. They once got a call from a customer faced with a dire emergency. It was Friday morning and an investment property he had agreed to purchase was scheduled to close on Monday. The problem was that his bank had originally approved the loan but then backed out at the last minute.
If the customer could not get to closing on Monday, he would have lost both the deal and his earnest money. Yet Actium was not fazed. They approved the loan and prepared the documents before the close of business that day. On Monday morning, both documentation and funding were forwarded to the title company. Closing happened on time and everyone was happy.
No bank could have done that. Traditional bank loans take months to arrange. Hard money lenders can work more quickly because their approval and underwriting processes are both simpler and more streamlined. They work so quickly that most hard money loans are approved and funded in days.
My Mortgage Took an Eternity
Sometimes I find myself disappointed that hard money is not available for residential mortgages. I have purchased three houses in my lifetime, and two of the three were a big hassle in terms of arranging financing.
My most recent mortgage was a real nightmare. I brought more than 50% to the table as a down payment. The first lender I contacted rejected my application. The second one approved but then changed its mind. The third lender finally came through but put me through the ringer for three months. Honestly, I was lucky to close on time.
Then There Were Those Student Loans
I wish I could say that my two unsavory mortgage lending experiences were the only bad experiences throughout the 40+ years of my adult life. But I cannot. Years after my first mortgage, I had to go through the financing nightmare to help arrange student loans for my son.
If you have never done the student loan thing before, you don’t know what you’re missing. Talk about having to jump through hoops! You would think I was asking for millions of dollars to buy Florida swamp land. My wife, son, and I finally got through the process just in time to complete enrollment. But it was a tough time getting there.
A Messy Quagmire of Paperwork
So why does traditional lending require so much time and hassle compared to hard money? I am no expert, but I think it boils down to the messy quagmire of paperwork traditional lending is known for. There are so many documents in play that I am sure underwriters find themselves overwhelmed. By the way, hard money lenders only require a fraction of the documentation.
I have never had the pleasure of applying for a hard money loan. Sometimes I wish the need were there. Other times I just wish that every financial service were as quick, efficient, and effortless as hard money.
