Detroit Hard Money Lenders: Speedy Real Estate Loans
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Looking to kickstart your next real estate venture in the Motor City? A hard money loan might be just what you need. From flipping houses in Rosedale Park to acquiring rental properties in Greektown, Detroit’s hard money lenders can provide the quick funding and flexible terms you need. These loans are especially useful for short-term projects and those with limited initial funds or credit issues.
Even if you’re not into real estate investments but need to bridge the gap between buying and selling a home, we’ll discuss alternative options for leveraging your home’s equity. This article will dig into the essentials of hard money lending in Detroit, guiding you to make informed decisions that align with your real estate objectives.
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Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private individual or company that provides short-term loans secured by real estate. Unlike traditional banks, these lenders emphasize the property’s value rather than the borrower’s credit score. Their clients are often house flippers and investors buying rental properties who need quick, flexible financing.
Loan amounts are based on the after-repair value (ARV) of the property, which is its estimated value post-renovation. Typically, lenders provide a percentage of the ARV to ensure profitability and security.
Interest rates for hard money loans range from 8% to 15%, with terms usually between 6 to 24 months. Additional costs may include origination fees, closing costs, and points. Failure to repay can result in the lender taking possession of the property to recoup their investment.
How does a hard money loan work?
For those in Detroit seeking flexible and fast financing for real estate projects, hard money loans can be a viable solution. Here’s how these loans typically work:
- Short-term loan: Hard money loans usually have repayment terms of 6 to 24 months, much shorter than the standard 30-year mortgage.
- Faster funding option: These loans can be processed and funded in a few days, whereas traditional mortgages can take 30 to 50 days to complete.
- Less focus on creditworthiness: Lenders prioritize the property’s value over the borrower’s credit score, making these loans accessible to more people.
- More focus on property value: Loan amounts are based on the property’s loan-to-value ratio, using the property as collateral.
- Not traditional lenders: These loans are offered by private investors or companies, not traditional banking institutions.
- Loan denial option: They are ideal for those who have been denied a mortgage but possess substantial home equity.
- Higher interest rates: These loans carry higher interest rates due to the higher risk for lenders.
- Might require larger down payments: A larger down payment of 20%–30% is often required.
- More flexibility: Hard money lenders can provide more flexible terms, avoiding strict debt-to-income criteria.
- Potential for interest-only payments: Some lenders offer the option of interest-only payments, easing initial financial burdens.
What are hard money loans used for?
Hard money loans are a valuable resource in the Detroit real estate market, offering solutions for quick funding needs and for those unable to obtain traditional loans. Here are some scenarios where hard money loans are commonly used:
1. Flipping a house: Detroit investors engaged in flipping homes benefit from hard money loans by obtaining rapid financing. This allows for quick property purchases and renovations, leading to faster sales and profits.
2. Buying an investment rental property: These loans help investors acquire and rehab rental properties. Fast access to funds ensures timely renovations and quicker rental income generation.
3. Purchasing commercial real estate: Hard money loans offer the speed and flexibility needed for acquiring commercial real estate.
4. Borrowers who can’t qualify for traditional loans: Individuals with ample home equity but poor credit can turn to hard money loans. These loans are based on the property’s value, making them accessible to those with credit challenges.
5. Homeowners facing foreclosure: Homeowners facing foreclosure can use hard money loans to refinance their debts or gain time to sell their property. This approach can help prevent foreclosure and preserve their credit rating.
How much do hard money loans cost?
Hard money loans come with higher costs compared to traditional loans due to the higher risk and expedited process. Common costs include:
- Interest rates: These can be 8% to 15% or more.
- Origination fees: Lenders often charge 1% to 5% of the loan amount.
- Closing costs: These can include various fees, such as legal and appraisal fees.
- Points: Lenders might charge upfront points, a percentage of the loan amount.
Online calculators can estimate these costs accurately.
Alternatives to working with hard money lenders
If you’re a homeowner exploring ways to leverage your home’s equity instead of using a hard money loan, consider these options:
Take out a second mortgage: A home equity loan or HELOC can offer lower interest rates and provide necessary funds more affordably than hard money loans.
Cash-out refinance: This method allows you to refinance your current property and withdraw cash to fund new investments, usually at lower interest rates.
Borrow from family or friends: Personal loans from family or friends can provide flexible repayment options and lower interest rates, making them a cost-effective choice.
Use a government-backed loan program: Government programs from the FHA, VA, or USDA can help you buy homes with reduced down payments and interest rates.
Peer-to-peer loan: These loans, through platforms like Funding Circle, connect borrowers with individual investors who might offer more favorable terms.
Specialized loan programs: Look into loans specifically designed for fixer-uppers or refinancing investment properties, which can help replace an existing hard money loan.
Request a seller financing option: Some sellers may agree to finance the purchase, leading to lower closing costs and easier eligibility criteria.
How to buy before you sell
The perfect listing often appears unexpectedly, whether it’s a cozy bungalow or a modern loft downtown. For Detroit homeowners looking to buy a new home before selling your current one, HomeLight’s Buy Before You Sell (BBYS) program can simplify the process.
With the Buy Before You Sell program, you can leverage your current home’s equity to make a competitive, non-contingent offer on a new property. HomeLight can approve your equity unlock amount within 24 hours, with no upfront cost or commitment. This enables you to secure your next home and sell your existing one vacant, avoiding the inconvenience of moving twice.
Here’s how HomeLight Buy Before You Sell works:
The program charges a flat fee of 2.4% of your current home’s sale price. However, potential savings on moving costs, temporary housing, and the purchase price of your new home can make this worthwhile. Moreover, HomeLight’s BBYS fees are generally lower than the interest rates on bridge loans, which range from 9.5% to 12%.
3 top hard money lenders in Detroit
Traditional lenders might not always suit every real estate investment. When you need to move quickly on a promising opportunity, consider these top-rated hard money lenders in Detroit.
Michigan Mortgage Solutions
Michigan Mortgage Solutions loan offerings include home purchase loans, mortgage refinancing, and various loan programs such as FHA, VA, and USDA loans. The company emphasizes personalized service, leveraging over two decades of experience to assist clients in finding the best mortgage solutions for their needs.
Lending clientele: Residential real estate investors. They focus on funding single-family homes, condos, townhomes, and multi-family properties.
Loan criteria: LTV up to 80% of ARV
Michigan Mortgage Solutions holds a 4.9-star rating on Google based on 240 reviews. Reviews note the company’s exceptional customer service, efficient processes, and knowledgeable staff.
248-963-1894
Premium Hard Money
Premium Hard Money offers a variety of loan programs tailored for different investment strategies, including fix and flip, rental, and commercial projects.
Lending clientele: Residential, commercial, and development investors.
Loan criteria: LTV up to 75% of ARV
Premium Hard Money has received positive reviews from their clients, earning a 5 star rating on Google. Reviews note the company’s professionalism and quick response times, especially in situations where time is a factor.
248-759-8777
Lima One Capital
Lima One Capital offers hard money loans for real estate investors. Their programs include fix and flip, rental, new construction, and multifamily loans.
Lending clientele: Residential and commercial real estate investors
Loan criteria: LTV 70% up to 80% of ARV
Lima One Capital has earned a 4.0-star rating on Google with over 190 reviews. Clients frequently commend the company for its efficient processes, transparent communication, and professional staff.
800-390-4212
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Detroit?
The decision to use a hard money lender in Detroit should be based on your individual situation and real estate investment goals.
Determining if a hard money loan is suitable for you means evaluating your specific needs and investment plans. Hard money loans are tailored for real estate investors who require fast, flexible funding and can handle the higher costs and shorter repayment terms. If these conditions align with your objectives, a hard money loan could be advantageous for your Detroit property investments.
For homeowners aiming to leverage their equity, HomeLight’s Buy Before You Sell program presents a practical alternative. Instead of incurring high interest rates, this program charges a flat fee, helping you make a stronger offer and facilitating a seamless move.
To connect with experienced real estate agents in Detroit who work with hard money lenders, HomeLight can introduce you to top professionals in your area.
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