Hard Money- A specific type of asset-based loan financing in which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued with a higher interest rate than a conventional loan because you will not be in the loan for a long period of time. Typically, people are in a hard money loan for a month or two.

Short Sale- A sale of real estate in which the sale proceeds are less then the balance owed on the property’s loan.

Return On Investment (ROI)- A performance measure that is used to evaluate the efficiency of an investment. When using hard money on a buy-fix-sell house, the average ROI is about $15,000.

Points- What a hard money lender charges you at origination. One point equals one percent of a loan. If a hard money lender says I’m at 4 and 14, they are charging 4 points at a 14 percent interest rate.

Interest- There is not a PITI payment (principal, interest, taxes and insurance) on a hard money loan.  Instead, you will only pay interest for time of the repairs.

Term- Length of the loan. Most hard money loans are a year term, but you refinance into a conventional loan as soon as the house is repaired.

LTV- Loan to Value, is the amount of the After Repair Value (ARV) of the house. Typically the bank gives 70% of the ARV. So, a house with a value of $100,000 will receive a LTV of $70,000.

Qualifying/ Refinancing with Hard Money- I will qualify you before you decide to choose hard money. There are four things that I look at and need in order for you to qualify:

1. 1.Money in the bank- You will need cash reserves. The lender likes to see that you have double the cost of the rehab in the bank. For example, if your rehab is estimated to be $14,000, you need to have a minimum of $28,000 in cash or line of credit.
   

2. 2.Excellent Credit- Your credit score is very important to the lender.  Right now in order to qualify for hard money you will need a 680 FICO score.
   

3. 3.Verifiable Income- This can be determined by tax returns or a W2.
   

4. 4.Limited Debt- Your debt to income (DTI) ratio needs to be below 45%. For example, if you make $100,000 and you have $45,000 in debt, your debt to income ratio is 45%. The general rule of thumb is that your DTI can not be above 45%.
   

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