A hard money loan and a conventional loan are both ways to finance real estate, but they differ in terms of requirements, cost, and purpose. Here’s a breakdown:
1. Hard Money Loan
Best For: Real estate investors, house flippers, and short-term financing needs.
Lender: Private lenders or investment groups.
Approval Based On: Property value (collateral), not personal credit or income.
Interest Rates: High (8%–15% or more).
Loan Term: Short (6 months – 3 years).
Down Payment: 20%–40% typically.
Speed: Fast approval (days, not weeks).
Flexibility: More flexible terms but higher risk.
2. Conventional Loan
Best For: Homebuyers and long-term property investors.
Lender: Banks, credit unions, mortgage companies.
Approval Based On: Credit score, income, debt-to-income ratio.
Interest Rates: Low (4%–8% typically).
Loan Term: Long (15–30 years).
Down Payment: 3%–20% (can use FHA, VA, or conventional financing).
Speed: Slower approval process (weeks).
Flexibility: Stricter requirements but lower cost.
Key Takeaways
- If you need quick financing for an investment or flip, go with a hard money loan.
- If you're buying a home to live in or hold long-term, a conventional loan is better.
- Hard money loans are expensive but fast; conventional loans are affordable but slow.
Add comment
Comments