Dothan is an Alabama city near the southeastern border of the state. It is named after a city in the Bible, and Dothan is a suburb that is considered one of the best places to live in Houston County. According to Niche, Dothan is a city with great schools and a very affordable place to live well below the national median. 59% of residents own their homes in Dothan, while 41% of residents rent their homes.
With both a small town and big city feeling, Dothan is a nice place for settling down and a great place to begin investing in real estate. According to Realtor, Dothan is a very competitive market for both buyers and sellers. In particular, it’s currently known as a seller’s market, where there’s very high demand for housing and not as much supply to meet that demand. As a result, houses are selling fast and for higher than listing price.
Hard money loans might be your best option for being a real estate investor in the Dothan market. Hard money loans are known for being bridge loans or last resort knowns, but they’re also used primarily for real estate transactions. The biggest advantage of a hard money loan is its speed of approval. Most hard money lenders can approve a loan within a couple of days, which makes an investor very competitive and able to put down an offer in the Dothan market.
A hard money loan can be approved much quicker than a traditional loan from a bank, which can take a couple months at least to be approved. The reason hard money loans can be approved so quickly is because they rely on the property as collateral rather than the credit and financial position of the applicant.
Traditional loans rely on good credit from the borrower, but hard money loans don’t require good credit. While the majority of hard money lenders still have minimum credit score requirements of 600 to 620, the vast majority of hard money lenders set terms for hard money loans based on the property itself. Hard money lenders often try to determine whether a property can pay off a loan and use the property to determine the terms of a loan. If the borrower defaults, the lender takes on the property, which can result in even greater repayment for the hard money lender, but also greater risk.
Because of these risks (the property being the only collateral against default for the lender), there are many cons to hard money loans as well. Hard money loans have very high interest rates compared to mortgage loans, with the average hard money lender having an average interest rate of 8–15%.
Also, hard money loans have lower LTV ratios than traditional loans, especially for new investors, which means borrowers have to pay high down payments in relation to the price of the property. Lastly, hard money loans often have short repayment periods of more or less a year, compared to the 15 to 30-year mortgages of traditional lenders.
For these reasons, you should have a good strategy for using hard money loans. Not every hard money lender is trustworthy. Some hard money lenders might tack on extra fees like origination fees or closing costs, as well as extra underwriting costs.
It’s important to be selective in finding the best hard money lenders in Dothan, and we have done the work so you don’t have to. Here are the best hard money lenders in Dothan to partner with you in your real estate investing journey.