Hard Money Lenders Pennsylvania: Quick Financing Solutions

Published on July 30th, 2024
10 min read

Joseph Gordon Editor
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Joseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.

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A hard money loan can be a strong solution when financing real estate investments in Pennsylvania. These loans offer quick access to funds, making them a good option for those looking to capitalize on time-sensitive opportunities. Whether you’re flipping homes in Pittsburgh or investing in rental properties in Philadelphia, knowing how hard money loans work is important.

Hard money loans differ from traditional financing methods in that they focus more on the property’s value than the borrower’s creditworthiness.

This guide will explore what hard money lenders are, how these loans operate in Pennsylvania, their costs, and the situations where they can be most beneficial.

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 loans secured by real estate. These lenders typically work with house flippers, real estate investors, and individuals who can’t secure traditional financing.

Unlike conventional lenders, hard money lenders focus on the after-repair value (ARV) of a property, which is the estimated value of the property after renovations. This allows borrowers to obtain loans based on the future potential of their investment rather than its current state.

Interest rates for hard money loans are higher than traditional loans, reflecting the increased risk and short-term nature.

If a borrower fails to repay, the lender can seize the property. Hard money loans are often used for quick projects, like flipping homes or buying rental properties.

Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront. As with any secured loan, failure to repay a hard money loan can result in the lender seizing the asset, such as a house, to recover their investment.

How does a hard money loan work?

Hard money loans in Pennsylvania offer a flexible and expedited financing option for real estate investors. Here’s how they work:

Short-term loan: Hard money loans typically last six months to a few years and are suitable for quick investment projects.
Faster funding option: These loans can be funded within days, much quicker than the 30 to 50 days traditional mortgages take.
Less focus on creditworthiness: Lenders prioritize the property’s value over the borrower’s credit score.
More focus on property value: Loan amounts are based on the property’s loan-to-value ratio or its after-repair value (ARV).
Not traditional lenders: These loans come from private investors or companies, not banks.
Loan denial option: Lenders might deny a loan if the property doesn’t meet their criteria or if the borrower lacks sufficient home equity.
Higher interest rates: Rates can range from 8% to 15% or higher, depending on the lender’s risk assessment.
Might require larger down payments: Borrowers often need to put down 20%–30% of the property’s value.
More flexibility: Hard money loans offer more flexible terms compared to traditional loans.
Potential for interest-only payments: Some lenders may allow interest-only payments during the loan term, with the principal due at the end.

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What are hard money loans used for?

Hard money loans serve various purposes for real estate investors and homeowners:

Flipping a house: Investors use these loans to buy, renovate, and quickly resell properties for a profit. Flipping homes requires quick access to capital, which hard money loans provide.
Buying an investment rental property: Investors can secure and renovate properties to increase rental income.
Purchasing commercial real estate: These loans can fund commercial property purchases that need renovations or quick turnarounds.
Borrowers who can’t qualify for traditional loans: Those with poor credit or unconventional income sources may turn to hard money loans.
Homeowners facing foreclosure: These loans can provide the necessary funds to repay foreclosure debts and save the home.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

Interest rates: 8% to 15% or higher, based on risk assessment.
Origination fees: 1% to 5% of the loan amount.
Closing costs: Legal, appraisal, and administrative fees.
Points: A percentage of the loan amount charged upfront.

Online calculators can help estimate these costs.

Alternatives to working with hard money lenders

If you’re considering other financing options, here are some alternatives:

Take out a second mortgage: Home equity loans or lines of credit can offer funds at lower interest rates.
Cash-out refinance: This allows you to refinance an existing property, pulling out cash to finance your new investment.
Borrow from family or friends: Personal loans from loved ones can offer flexible terms and lower interest rates.
Use a government-backed loan program: FHA, VA, or USDA programs assist in purchasing homes with lower down payments and interest rates.
Peer-to-peer loan: These loans come from individual investors through lending platforms, often with different terms than hard money loans.
Specialized loan programs: Consider specialized loans for fixer-uppers or refinancing investment properties.
Request a seller financing option: 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 allows homeowners to buy a new home before selling your current one. This program offers competitive rates of 9.5% to 12% and removes the stress of timing the sale of your existing home with the purchase of a new one. You can move into your new home while HomeLight handles the sale of your old property, simplifying the transition and providing peace of mind.

The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property.

If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.

Here’s how HomeLight Buy Before You Sell works:

Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings you could see in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home.

A view of houses that can represents house hunting

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A home that is building equity for its owners.

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3 top hard money lenders in Pennsylvania

Hard Money Bankers

Hard Money Bankers is a comprehensive and self-funded private/hard money lending company known for its fast and flexible financing solutions. It caters to residential and commercial real estate investment deals across Pennsylvania.

Lending clientele: Residential and commercial real estate investors

Loan criteria: Up to 65% LTV

Hard Money Bankers has a 4.6-star rating on Google based on 30 reviews. Clients praise them for their professionalism and speed in finalizing lending within a few days.

hardmoneybankers.com

800-883-8290

Direct Mortgage Loan Company

Direct Mortgage Loan Company, a private lender based in Philadelphia, specializes in fixed-rate, bridge financing for real estate developers and investors. It offers a diverse lending portfolio that covers land, rehab projects, and new constructions across various property types, including single-family, multifamily, mixed-use, and commercial properties.

Lending clientele: Real estate investors and developers

Loan criteria: 50-100% LTV, depending on the borrower and scenario

Direct Mortgage Loan Company has a 4.8-star rating on Google based on 44 reviews. Clients commend them for making stressful projects painless and easier.

dmlc-lending.com

215-844-1200

CCC Holdings, LLC

CCC Holdings is a Pittsburgh-based private lending company focused on supporting real estate investors in Allegheny, Butler, Beaver, Washington, and Westmoreland Counties. They specialize in hard money and rehab loans and offer remarkable service by ensuring draw payments are disbursed within 24 hours after a rehab milestone is completed.

Lending clientele: Real estate investors

Loan criteria: 70% of ARV

CCC Holdings, LLC has a 5-star rating on Google based on 13 reviews. Past clients praise them for their real estate knowledge.

hardmoneypgh.com

412-638-9980

Should I partner with a hard money lender in Pennsylvania?

Working with a hard money lender in Pennsylvania can be a smart move for real estate investors looking for quick access to funds. These loans are ideal for those flipping houses, purchasing rental properties, or engaging in other short-term investments. However, they come with higher costs and shorter terms compared to traditional loans.

For homeowners seeking to leverage their equity without the high costs associated with hard money loans, HomeLight’s Buy Before You Sell program can be a great alternative.

This program allows you to buy a new home before selling your current one, offering a smoother and less stressful transition.

Whether you decide on a hard money loan or another financing option, HomeLight can help you meet your financial goals.

Header Image Source: (Mick Kirchman / Unsplash)

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