Hard Money Lenders Dallas: Top Choices and Alternative Financing Options

What is a hard money lender?

A hard money lender is a private individual or company that offers short-term loans secured by real estate. Unlike traditional lenders, who focus heavily on the borrower’s creditworthiness and income, they prioritize the value of the property being used as collateral.

Their loan programs are popular among real estate investors, such as house flippers and rental property buyers, who need quick access to funds and flexible terms. Hard money lenders use after-repair value (ARV), the estimated value of a property after all renovations and repairs are completed, to determine the loan amount they are willing to offer. They usually lend a portion of the home’s ARV to ensure that the investment is safe and profitable.

Hard money loans typically have higher interest rates, ranging from 8% to 15% or more, and shorter repayment periods, usually between 6 to 24 months. Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront.

As with any secured loan, if you don’t pay back a hard money loan, the lender can take the property you used as collateral, like your house, to get their money back.

How does a hard money loan work?

If you’re a real estate investor who needs fast, flexible financing, working with hard money lenders in Dallas could be a great fit. Here’s a quick rundown of how hard money loans work:

What are hard money loans used for?

Hard money loans address specific financing needs in the Dallas real estate market. They’re often sought after by investors who require fast funding or may have difficulty qualifying for traditional bank loans. Let’s learn more about what hard money loans are typically used for:

• Flipping a house: For Dallas flippers, hard money loans make it easy to get cash fast so you can buy and renovate properties. They help you move quickly, make necessary improvements, and resell them fast for profit.
• Buying an investment rental property: Investors looking for rental properties can use hard money loans to snap up properties fast, especially those needing immediate repairs. Compared to traditional bank loans, hard money loans allow landlords to complete renovations and start generating rental income more quickly. 
• Acquiring commercial real estate: Hard money loans are popular in commercial real estate because they’re flexible and close fast. They’re especially helpful when timing is everything and you need to move quickly to snag a good deal.
• Exploring alternative financing: Some Dallas homeowners with plenty of equity but bad credit go to hard money lenders because traditional loans aren’t an option. As mentioned, hard money lenders focus on the value of the property, not your credit history.
• Homeowners facing foreclosure: Homeowners nearing foreclosure may use hard money loans to refinance their debts or buy time to sell the property. This can provide a temporary solution to avoid losing their home or getting a foreclosure mark on their credit report.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

• Interest rates: 8% to 15% or higher, based on risk assessment
• Origination fees: 1% to 5% of the loan amount
• Closing costs: Legal, appraisal, and administrative fees
• Points: A percentage of the loan amount charged upfront

Use online hard money loan calculators to help estimate your costs.

Alternatives to working with hard money lenders

If you’re a homeowner, rather than an investor, who is looking for a way to leverage your current home’s equity, here are a few options to consider:

• Take out a second mortgage: If you have substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide the needed funds at a lower interest rate compared to a hard money loan.
• Cash-out refinance your home: This option allows you to refinance an existing property, pulling out cash to finance your new investment. It often comes with lower interest rates than hard money loans.
• Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a more affordable option.
• Use a government-backed loan program: Programs offered by the FHA, VA, or USDA can assist in purchasing homes with lower down payments and reduced interest rates.
• Consider peer-to-peer loans: These loans are funded by individual investors through various lending platforms. They’re similar to hard money loans, just with their own set of terms.
• Take advantage of specialized loan programs: Consider specialized loans for fixer-uppers or investment property refinancing if you already have a hard money loan and want to replace it.
• Request a seller financing option: In some cases, sellers may agree to finance the purchase themselves, which can result in lower closing costs and less stringent eligibility requirements.

How to buy before you sell

Sometimes, the perfect listing pops up when you’re least expecting it. Maybe it’s a rare mid-century modern home or a two-bedroom condo within walking distance of your job. If you’re a Dallas homeowner who wants to buy a new home before selling your current one, HomeLight offers an innovative solution that streamlines the process.

The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice. 

Here’s how HomeLight Buy Before You Sell works:

Although there’s a flat fee based on your current home’s sold price, the potential savings you could see in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home. On top of that, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.

3 top hard money lenders in Dallas

Hard money lenders in Dallas offer fast, flexible funding for both investors and homeowners. They can help you move quickly on deals or bridge the gap between buying and selling a home. Here are three top lenders in the area known for their reliability and competitive terms.

Investing in real estate?

Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.

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Should I partner with a hard money lender in Dallas?

The decision to use a hard money lender in Dallas should be based on your individual situation and real estate investment goals. This type of financing is ideal for projects requiring quick turnaround or when traditional financing just isn’t an option. If you’re ready to manage the higher costs and shorter repayment terms in exchange for fast, flexible funding, consider reaching out to a hard money lender in Dallas for your next investment opportunity.

Meanwhile, if you’re a homeowner looking to tap into your home’s equity, a program like HomeLight’s Buy Before You Sell might be a better fit. Instead of taking on a sky-high interest rate, you’ll pay a small flat fee while benefitting from a more competitive offer and a simplified move.

As with any major financial decision, consider your long-term strategy and consult with a financial advisor to make sure it aligns with your overall investment goals. If you’re looking to connect with investor-friendly real estate agents in Dallas who have access to trusted hard money lenders, let HomeLight introduce you to top professionals in your area who fit that criteria. 

Header Image Source: (Erin Hervey / Unsplash)

Editor’s note: This post is for educational purposes only and should not be considered financial advice. HomeLight encourages you to consult your own advisor.