Hard Money Lenders Houston: Fast and Flexible Loans

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Are you looking to finance your next real estate project in Houston with a hard money loan? Whether you’re eyeing a fixer-upper in The Heights or planning to invest in a commercial property in Downtown, hard money lenders in Houston offer a flexible and speedy alternative to traditional financing. These loans are particularly useful for investors needing quick access to funds and for those whose credit history might not meet conventional loan requirements.

In this article, we’ll explore the ins and outs of hard money lending in Houston, explaining how these loans work, what they’re typically used for, and how much they cost. We’ll also discuss alternatives to hard money lenders, including HomeLight’s Buy Before You Sell program. Whether you’re a seasoned investor or a homeowner looking to bridge the gap between buying and selling, this guide will help you make informed decisions about your financing options.

Start Making Offers Without Waiting to Sell Your Home

Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

A hard money lender is a private entity or individual offering short-term loans backed by real estate. Unlike traditional banks, these lenders prioritize the property’s value over the borrower’s credit score or income. Common clients include house flippers and those investing in rental properties, who need quick, flexible financing.

Loan amounts are determined using the after-repair value (ARV), which is the estimated worth of a property after renovations. Hard money lenders typically offer a percentage of this ARV, ensuring the loan is secured by the property’s potential value.

Interest rates for hard money loans are higher, generally ranging from 8% to 15%, with terms lasting from 6 to 24 months. Borrowers also face origination fees, closing costs, and points. If a borrower defaults, the lender can seize the property to recover their funds.

How does a hard money loan work?

If you’re a real estate investor in Houston seeking a financing option that offers speed and flexibility, connecting with hard money lenders might be the solution you need. Here’s an overview of how hard money loans work:

  • Short-term loan: These loans typically have a repayment period of 6 to 24 months, unlike the 15- to 30-year terms common with conventional mortgages.
  • Faster funding option: Hard money loans can be approved within days, compared to the 30 to 50 days typical for traditional mortgage loans.
  • Less focus on creditworthiness: Approval relies less on your credit score and income history, with more emphasis placed on the value of the property.
  • More focus on property value: These loans are based on the loan-to-value ratio of the property being used as collateral.
  • Not traditional lenders: Hard money loans are usually provided by individual investors or private lending companies, not traditional banks.
  • Loan denial option: These loans are often utilized by individuals with poor credit who have been denied a mortgage but possess significant home equity.
  • Higher interest rates: Due to the higher risk involved, hard money loans come with higher interest rates compared to traditional mortgages.
  • Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30% of the property’s value.
  • More flexibility: With fewer government regulations, hard money lenders in Houston can set flexible terms, including credit scores and debt-to-income criteria, and can help avoid foreclosure.
  • Potential for interest-only payments: Unlike traditional mortgages, hard money loans may allow for interest-only payments or deferred payments initially, providing additional financial flexibility.

What are hard money loans used for?

Hard money loans serve various financing needs in the Houston real estate market, offering quick funding solutions for investors and individuals with unique financial situations. Let’s explore the common uses of hard money loans:

Flipping a house: For Houston investors focused on flipping homes, hard money loans provide fast cash to purchase and renovate properties. These loans help flippers quickly acquire homes, make necessary renovations, and sell them for a profit within a short period.

Buying an investment rental property: Investors looking to purchase rental properties can benefit from hard money loans. These loans allow them to quickly acquire properties, especially those needing repairs, enabling landlords to complete renovations and start generating rental income sooner.

Purchasing commercial real estate: Hard money loans are advantageous for commercial real estate transactions due to their flexibility and quick closing times. They are particularly useful when timing is critical, helping investors secure valuable commercial properties without the delays associated with traditional financing.

Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit may find hard money loans an accessible option. These loans prioritize the asset’s value over the borrower’s credit score, making them a viable alternative for those unable to qualify for conventional loans.

Homeowners facing foreclosure: Homeowners facing foreclosure can use hard money loans to refinance debts or buy time to sell their property. This provides a temporary solution to avoid foreclosure, helping them manage their financial situation more effectively.

How much do hard money loans cost?

The cost of hard money loans is typically higher due to the increased risk and quick, flexible funding. Here are some typical costs associated with these loans:

  • Interest rates: These can range from 8% to 15%, depending on the lender’s risk assessment.
  • Origination fees: Lenders may charge 1% to 5% of the total loan amount.
  • Closing costs: These can include legal fees, appraisal fees, and other administrative costs.
  • Points: Lenders might charge points upfront, which are a percentage of the loan amount.

Many online calculators are available to help estimate these costs.

Alternatives to working with hard money lenders

If you’re a homeowner looking for alternatives to hard money loans, here are some options to consider:

Take out a second mortgage: A home equity loan or home equity line of credit (HELOC) allows you to tap into your home’s equity at typically lower interest rates than hard money loans.

Cash-out refinance: This option lets you refinance your existing property and pull out cash to finance a new investment, often with lower interest rates than hard money loans.

Borrow from family or friends: Personal loans from family or friends can offer more flexible repayment terms and potentially lower or no interest rates, making them a cost-effective alternative.

Use a government-backed loan program: Programs from the FHA, VA, or USDA provide assistance in purchasing homes with lower down payments and reduced interest rates.

Peer-to-peer loans: Loans from individual investors through platforms like LendingClub or Prosper offer an alternative to traditional hard money loans with potentially different terms.

Specialized loan programs: Consider loans tailored for fixer-uppers or refinancing investment properties if you have an existing hard money loan and want to replace it.

Request a seller financing option: Some sellers may agree to finance the purchase themselves, offering lower closing costs and more lenient eligibility requirements.

How to buy before you sell

Sometimes, the perfect listing appears when you’re least expecting it. Perhaps it’s a charming bungalow in Montrose or a sleek, high-rise condo in Midtown. If you’re a Houston homeowner looking to buy a new home before selling your current one, HomeLight offers an innovative solution that simplifies the process.

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

Here’s how HomeLight Buy Before You Sell works:

There is a flat fee of 2.4% of your current home’s sold price, but the potential savings in other areas might outweigh this cost. You could save on moving expenses, temporary housing, and possibly even the final purchase price of your new home. Additionally, 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 Houston

Traditional lenders may not be suitable for every real estate investment. If you need to act quickly and seize an opportunity, consider these top-rated hard money lenders in Houston.

Tidal Loans

Tidal Loans, a Houston-based hard money lender, offers flexible fix-and-flip and rental property loans. The company was founded in 2016, and the team has over 50 years of combined real estate experience. Once all of the necessary documentation is provided, Tidal Loans can normally close a loan the next business day. They currently serve the Houston, Austin, and San Antonio markets and loan on single-family and multi-family residential properties used for investment purposes.

Lending clientele: Residential real estate investors

Loan criteria: Up to 70% ARV

Catalyst Funding

Catalyst Funding, located in Houston, was founded in 2012. They offer hard money loan programs for house flippers and those looking to rehab rental properties. Their loans can close in as few as seven to 10 days, and borrowers can expect six-month terms with the option of extending up to 12 months (for an additional fee).

Lending clientele: Residential and commercial real estate investors

Loan criteria: 70%–75% ARV

Noble Mortgage & Investments

Noble Mortgage & Investments is located in Houston and was founded in 2003 by Darel Daik, a real estate finance professional since 1995. The company provides hard money loans to real estate investors ranging from $50,000 to $1.5 million. (For those investing outside of Houston, there is a minimum loan amount of $100,000.) Aside from Houston, Noble Mortgage & Investments also serves the Austin, San Antonio, and Dallas/Fort Worth markets.

Lending clientele: Residential and commercial real estate investors

Loan criteria: Up to 75% ARV

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.

Should I partner with a hard money lender in Houston?

Deciding whether a hard money loan is right for you depends on your specific situation and real estate investment goals in Houston. Hard money loans are ideal for real estate investors needing quick access to funds, especially for projects requiring fast turnaround times or when traditional financing isn’t an option. If you’re prepared to handle higher interest rates and shorter repayment terms in exchange for flexible, rapid funding, connecting with a hard money lender in Houston could be the right move for your next investment.

For homeowners looking to leverage their home’s equity without the high costs associated with hard money loans, HomeLight’s Buy Before You Sell program offers a compelling alternative. This program allows you to make a stronger offer on a new home by using the equity from your current property, all for a flat fee. This can result in a more competitive offer and a simplified moving process.

As with any major financial decision, consider your long-term strategy and consult with a financial advisor to ensure it aligns with your overall investment goals. If you’re seeking to connect with investor-friendly real estate agents in Houston who have access to trusted hard money lenders, HomeLight can introduce you to top professionals in your area.

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