Hard money loans can usually be arranged much more quickly than their conventional counterparts. As such, it is not unusual for borrowers new to the hard money game to ask how quickly they can get loans. The answer varies. There are a number of factors in play, factors that can be different from one scenario to the next.
Days Rather Than Months
Although it’s impossible to set a hard-and-fast rule for the speed at which hard money loans can be arranged, Salt Lake City’s Actium Partners says that most hard money deals are arranged in a matter of days. Actium has been known to get things done in as little as one business day when necessary.
By contrast, banks need at least several weeks minimum. Most conventional loans require several months to arrange. Obviously, there is a considerable disparity here. It explains why certain types of borrowers – like real estate investors – prefer hard money over conventional funding.
The Property Appraisal
Hard money lenders make approval decisions based on collateral. In other words, a borrower will offer Actium Partners some sort of asset as collateral on the loan. Most hard money loans go to fund real estate transactions. So in most cases, the property being acquired is the collateral.
A lender will not approve a hard money loan without first doing a property appraisal. So in order to facilitate speed, lenders want to get appraisals done as quickly as possible. An appraisal could be conducted the same day a loan is applied for. But scheduling conflicts could mean putting off the appraisal for a day or two.
The Underwriting Process
Your average hard money lender would begin the underwriting process after reviewing the borrower’s application. Underwriting can begin even while waiting on an appraisal. Even so, underwriters can only go so far while waiting on appraisal results.
Should all the stars align just perfectly, it is possible for underwriters to complete their paperwork within just a few hours. So it’s theoretically possible to be given loan approval mid-morning and have all the paperwork completed by mid-afternoon.
A more likely scenario would involve paperwork being completed the day after approval is given. But if there are any unforeseen complications, underwriting could take several days.
Signing the Documents
Once approval is given and all documents are prepared, it’s time for the borrower’s signature. This usually isn’t a big deal given that documents can be sent electronically. A borrower’s signature can be obtained within minutes of document completion.
If circumstances dictate that the lender send paper documents, the process will obviously be slowed. Things cannot move forward until the lender receives the returned documents with signatures intact.
Funding the Loan
The final step in the process is funding the loan. This is rarely a problem where speed is concerned. These days, funds are transferred electronically. It is nothing for a lender to send both documents and funding to a title company simultaneously. That way, the money is available as soon as the documents are signed.
Significantly Less Time
It is impossible to say that all hard money loans can be arranged in a set number of days. There are too many factors in play. But it is reasonable to say that hard money takes significantly less time to arrange than conventional funding.
Hard money lenders do things differently. Because their processes are more efficient and streamlined, it rarely takes more than a week to get a hard money loan from application to closing. Being able to move so quickly explains why certain types of borrowers make hard money their first option.
