Parma is a Cleveland suburb in Cuyahoga County the seventh largest city in Ohio with a population of over 80,000. It is the second biggest city in Cuyahoga County as well, right behind Cleveland. It is located on the southern edge of Cleveland and the skyline of Cleveland is often visible from Parma. Parma is named after Parma, Italy, and it is known for offices to companies like General Motors and Cox Cable Television.
Parma is known as a home to retirees and is a suburb where most people lived in their homes. People in the city tend to own their homes, and Parma is a very affordable place with median home values and median rents well below the national average. Right now, Parma is a seler’s market, which means prices are higher and sell faster. It also means demand for homes is outpacing supply, and a bidder in the city needs to put an offer down quickly to be competitive.
To compete in Parma, an investor might need a hard money loan. Hard money loans are also short term bridge loans or last resort loans. These loans are advantageous particularly because of the fast closing speed of the loans. They can be approved within a couple of days, and can usually be spent at the borrower’s discretion. This speed, convenience, and flexibility are often more beneficial to some investors than a mortgage.
While hard money loans can be approved within a couple of days, mortgage loans take entire weeks or months to be approved. This is the result of mortgages requiring significantly more documentation than hard money lenders, and requiring good standing financially in metrics like credit.
Hard money loans don’t depend on credit. Although many still have minimum credit scores of 600 to 620, hard money loans are mainly based on the after repair value of the property. They use the property as collateral, and when a borrower defaults on a hard money loan, the lender takes on the property. This means the lender needs to determine whether a hard money loan can pay off itself. While the lender could profit from the hard money loan, there’s still a chance the hard money loan may not pan out for a lender.
Because of all these aspects of hard money loans, they are inherently a lot riskier than traditional mortgage loans. Hard money loans have higher interest rates, lower LTV ratios, and shorter repayment periods than traditional loans. Without a good strategy for paying off the loan, these loans are very difficult to pay off. They are more expensive than traditional loans in the short term.
Mortgages, compared to hard money loans, have repayment periods of usually 15 to 30 years and interest rates just over 4% — hard money loans have 8–15% interest rates and repayment periods of more or less a year. These costly rates make hard money loans best left to the professionals, and new investors may have a really hard time getting hard money loans because many require successful track records
However, it’s important to also be selective with hard money loans. Not every hard money lender is trustworthy. Some put extra fees like closing costs and origination fees without communicating well with investors.
At Hard Money Lenders IO, we have you covered in finding the best hard money lenders in the Parma area. Look no further to find a partner in your real estate investing journey.