Muncie is the county seat of Delaware County, Indiana, and is known as “Middletown” and “Little Chicago.” Muncie has a population of over 65,000 people, and is about 50 miles northeast of Indianapolis. It is the home of Ball state University and the Ball Corporation, as well as the home of the Garfield comic strip.
Muncie is a suburb and has a lot of renters in the city. It is home to many young professionals and is especially well-rated for night life. It has a median home value of $73,500 and a median rent of $722, which are both well below the national average. Muncie is known for being a seller’s market at the moment, which means demand is rapidly outpacing supply in the city. This means real estate investors might have to get into bidder’s wars to be competitive in the city.
Hard money loans might be the answer for real estate investing in Muncie. Hard money loans provide a crucial advantage for every investor: a very fast speed of approval. They can be approved within a couple of days, as opposed to a mortgage, which need a month more or less to be approved. Having these fast funds immediately makes an investor competitive for buying the property.
Hard money loans are also known as last resort or short-term bridge loans. They are used for fix and flips, long term rentals, construction projects, and repairs for distressed properties. They are mostly used for real estate transactions because of the nature of the loans, but they can also be approved so quickly because they rely on a very different asset than traditional mortgage loans. Traditional mortgage loans use the credit score of the borrower as the asset, while hard money loans use the property as the asset.
Most hard money lenders have minimum credit scores of 600 to 620. If a borrower defaults on the hard money loan, the lender takes on the property. But if a traditional mortgage loan is defaulted on, there’s a foreclosure that can be very lengthy and costly.
This means hard money loans are inherently very risky, for both the lender and the borrower. They have high interest rates of 8–15%, which are much higher than the interest rates of mortgages, which have average interest rates of just above 4%. They also have much shorter repayment periods of more or less a year, whereas most mortgages require 15 to 30 year payments. Hard money loans also have lower LTV ratios than traditional loans. This means they require lower down payments than traditional loans.
However, it’s important to not just trust any hard money lender because the field is so unregulated. Not every hard money lender is trustworthy. Some tack on extraneous fees like origination fees and closing costs. Others might have extra fees they may not disclose to the borrower until signing. New investors in particular may encounter significant barriers getting a hard money loan because most require a successful investing history on behalf of the borrower.
We at Hard Money Lenders IO have you covered in finding a trustworthy lender. Look no further for the best financing partner for your real estate transaction.