Hard Money Lenders Idaho: What You Need to Know
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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.
Finding quick real estate financing in Idaho can be challenging, especially when traditional loans are not an option. This is where hard money loans come into play. These loans offer a quicker, more flexible alternative for those looking to invest in properties without the lengthy approval processes of conventional lenders.
This guide will explore the ins and outs of hard money loans in Idaho. From what hard money lenders do to the specifics of loan costs and alternative funding options, we’ve got you covered, whether you’re an investor or a homeowner looking for a new profitable venture.
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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 provides short-term, asset-based loans, primarily to real estate investors like house flippers and rental property owners.
Unlike traditional lenders, hard money lenders focus more on the property’s value rather than the borrower’s credit score. They determine loan amounts based on the property’s after-repair value (ARV), which is the property’s estimated value after renovations.
Interest rates for hard money loans are typically higher than traditional loans, ranging from 8% to 15%, with additional fees and costs. If a borrower fails to repay the loan, the lender can seize the property, making it essential for borrowers to have a clear exit strategy. Hard money loans offer a fast, flexible financing solution but come with higher risks and costs.
How does a hard money loan work?
Hard money loans in Idaho offer a flexible financing option for real estate investors. Here’s how they typically work:
- Short-term loan: These loans usually have a term of 12 months, much shorter than a standard 30-year mortgage.
- Faster funding option: Approval and funding can take as little as a few days, compared to the typical 30 to 50 days for conventional loans.
- Less focus on creditworthiness: Unlike traditional loans, hard money loans prioritize the property value over the borrower’s credit score.
- More focus on property value: The primary consideration is the property’s loan-to-value ratio and its potential after-repair value.
- Not traditional lenders: These loans come from private investors or companies, not banks or credit unions.
- Loan denial option: If the property doesn’t meet the lender’s criteria, the loan can be denied, regardless of the borrower’s financial status.
- Higher interest rates: Interest rates can range from 8% to 15%, reflecting the higher risk involved.
- Might require larger down payments: Borrowers may need to put down 20% to 30% of the property’s value.
- More flexibility: Terms can be more negotiable than those of traditional loans, allowing for customized solutions.
- Potential for interest-only payments: Some hard money loans allow for interest-only payments during the loan term, with the principal due at the end.
What are hard money loans used for?
Hard money loans can be used in a variety of real estate scenarios. Here are some of the most common uses:
- Flipping a house: Ideal for flipping homes, where quick funding is important to buy, renovate, and sell properties for a profit.
- Buying an investment rental property: Useful for purchasing rental properties, allowing investors to secure and rehab the property swiftly.
- Purchasing commercial real estate: These loans are helpful when buying commercial properties needing renovations or quick turnarounds.
- Borrowers who can’t qualify for traditional loans: Beneficial for those with low home equity or poor credit who need alternative financing.
- Homeowners facing foreclosure: Can provide the necessary funds to avoid foreclosure by refinancing or catching up on payments.
How much do hard money loans cost?
The cost of hard money loans is typically higher than traditional loans. Here are some typical costs associated with hard money loans:
- Interest rates: These can range from 8% to 15% or higher, depending on the lender’s risk assessment.
- Origination fees: Lenders may charge 1% to 5% of the total loan amount as an origination fee.
- Closing costs: Additional fees at closing can include legal fees, appraisal fees, and other administrative costs.
- Points: Lenders might charge points (a percentage of the loan amount) upfront, which can add to the initial cost of obtaining a loan.
There are many online calculators available to estimate your costs.
Alternatives to working with hard money lenders
If you’re a homeowner looking for a way to leverage your current home’s equity, here are a few options to consider:
- Take out a second mortgage: A home equity loan or line of credit can provide the needed funds at a lower interest rate than a hard money loan.
- Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment.
- Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates.
- Use a government-backed loan program: FHA, VA, or USDA programs can help buyers purchase homes with lower down payments and reduced interest rates.
- Peer-to-peer loan: These loans are provided by individual investors through lending platforms. They function similarly to hard money loans but often have different terms.
- Specialized loan programs: If you already have a hard money loan and want to replace it, consider specialized loans for fixer-uppers or investment property refinancing.
- Request a seller financing option: Sometimes, sellers may agree to finance the purchase, resulting in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
HomeLight’s Buy Before You Sell program offers a seamless way to buy a new home before selling your current one. This program provides the funds needed to purchase your new home, allowing you to move without the pressure of selling first.
The process involves securing a short-term loan to cover your new home’s down payment and closing costs. Once you’ve moved, you can focus on selling your old house at the best possible price.
The benefits include reduced stress, avoiding the need for temporary housing, and potentially getting a better price for your old home. The costs are competitive, with rates that typically range from 9.5% to 12%. With HomeLight’s program, you can confidently buy a new home before selling your current one, making the transition smoother and more efficient.
Here’s how HomeLight Buy Before You Sell works:
3 top hard money lenders in Idaho
Traditional lenders might not be the solution for every real estate investment. If you want to move quickly and capitalize on an opportunity, explore the hard money lending options available in Idaho.
Northwest Private Lending
Northwest Private Lending provides equity-based lending solutions for residential and commercial real estate investors in Oregon, Idaho, and Washington. Their hard money loan options help clients acquire “cash only” listings and properties that traditional lenders typically do not finance. They specialize in bridge loans, allowing clients to buy a new home before selling it.
Lending clientele: Residential and commercial real estate investors
Loan criteria:
80% Max LTV of the purchase price on a fix and flip
75% or lower LTV of the purchase of an investment property
70% or lower LTV of the refinance of an investment property
50% LTV of the purchase or refinance of bare land
100% LTV loans available with additional collateral / cross-collateralization of other investment properties.
Northwest Private Lending has been BBB accredited with an A+ rating since 2018.
503-941-5473
Payette Financial Services, LLC
Payette Financial, a direct hard money lender, specializes in financing difficult transactions that conventional lenders avoid. They buy performing and non-performing commercial loans from third parties and offer funds to borrowers in several states needing immediate capital. They can provide money in as little as 10 days and lend against various commercial properties, including land parcels, industrial, retail, mixed-use, and more. They do not make residential home loans.
Lending clientele: Commercial real estate investors
Loan criteria: Loans from $25,000 to $2.5 million with interest rates ranging from 8% to 13%, depending on collateral and terms.
Payette Financial Services, LLC has a limited 5 reviews with a 4.2-star rating on Google.
208-333-2040
Alpha Lending LLC
Alpha Lending LLC offers bridge and commercial loans in Southern Idaho, including Boise, Twin Falls, and Nampa. Working with private money sources connects borrowers and lenders to secure funding for various real estate needs. Most loan requests can be pre-approved within 24 hours of receiving the application and required underwriting information.
Lending clientele: Residential and commercial real estate investors
Loan criteria: Loan criteria are not listed online; please contact them directly by phone or visit their website.
Alpha Lending LLC has 3 reviews with a 3.7-star rating on Google.
208-854-1122
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Should I partner with a hard money lender in Idaho?
Depending on your needs and circumstances, a hard money loan can be a good choice. Hard money loans are best suited for real estate investors who need quick, flexible project funding options. These loans can be ideal for flipping houses, buying rental properties, or purchasing commercial real estate.
However, if you’re a homeowner looking to leverage your equity, HomeLight’s Buy Before You Sell program might be a better fit. This program offers a smooth transition to your new home without the rush of selling your current one first. You can determine the best financing solution for your real estate goals in Idaho by exploring your options.
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