Hard Money Loan Funding Timeline: How Long Does It Take?
Getting a traditional real estate loan can be stressful and time-consuming. However, it doesn’t always have to be! Hard money loans are an alternative type of loan that investors can use to buy, fix, and flip properties quickly and efficiently. While the fees are higher and you may need a larger down payment, hard money loans can help you complete your real estate project as quickly as possible. But how much faster is it to get a hard money loan than a traditional mortgage loan? Today, we’ll review the hard money loan funding timeline and what information you’ll need to make the process go even faster.
Contents of This Article:
- Why Would You Need a Hard Money Loan?
- What Is the Hard Money Loan Funding Timeline?
- Can You Speed Up the Funding Process?
- Find the Right Lender for Your Project Today
Why Would You Need a Hard Money Loan?
If you’re a real estate investor, you know that hard money can come in handy. Whether you want to secure a real estate deal quickly or don’t qualify for a traditional mortgage loan, hard money loans can be useful in these scenarios. Some of the most popular reasons you may need a hard money loan include the following.
- To Secure Deals Quickly- You’ll want to close a deal quickly in a competitive market. Luckily, the hard money loan funding timeline is quite fast–sometimes within just a few days, allowing you to make quick moves regarding real estate purchases.
- Fix-and-Flip Projects- Hard money loans are ideal for short-term investments like fix-and-flip projects. Additionally, since these real estate loans in Maryland are often based on the property’s after-repair value (ARV), securing funds for both the purchase and renovations is easier.
- For Bridge Financing- Investors can also use hard money loans to cover short-term funding gaps, like if they decide to purchase another property before selling an existing one.
- Traditional Financing Isn’t an Option- If you have a lower credit score or an unsteady stream of income, you may not qualify for a traditional mortgage loan. This is where hard money loans come into play since they prioritize the property’s value instead of your financial history.
- Land Development or Construction Projects- Hard money loans are a good choice for investors who fund construction projects or purchase undeveloped land. They’re more flexible and easier to approve than traditional construction financing.
What Is the Hard Money Loan Funding Timeline?
The typical hard money loan funding timeline is around 1 to 2 weeks from start to finish. That said, some lenders may fund a loan quicker, sometimes within 48 hours. However, you can generally expect to wait around a week or two after your initial application for your loan to be funded. Next, we’ll review the specific steps and how long they typically take.
- Application and Pre-Approval
- Property Inspection/Valuation
- Underwriting Process
- Insurance and Closing
- Funding the Loan
Application and Pre-Approval
- Timeline: Same day to 1 to 2 business days
If you want a hard money loan, the first step is to fill out an initial loan application. You’ll want to have the necessary documentation ready, including proof of income, property details, and your credit history (if needed).
Property Inspection/Valuation
- Timeline: 1 to 3 business days
Once you get pre-approved, your lender will want to conduct a property inspection or appraisal. This step is extremely important, as your loan amount is generally based on the property’s value, often its after-repair-value (ARV), for fix-and-flip projects. However, note that whether or not your lending company has an in-house appraiser or hires a third party can affect the timeline.
Underwriting Process
- Timeline: 2 to 5 business days
The underwriting process for hard money loans is much quicker than that of a traditional loan. During this part of the loan process, your lender looks at your property valuation report, your proposed loan terms, your repayment plan, and other documentation. They may also ask for additional documentation, so keeping consistent communication with them is important to speed up the process.
Loan Terms and Negotiation
- Timeline: 1 to 2 business days
The cool thing about hard money loans is that the terms are generally negotiable. Each investor has their own goals and project plans, which lenders can cater to. During the negotiation process, you’ll discuss the interest rate, loan-to-value (LTV) ratio, and fees you’ll pay for the loan.
Closing and Funding the Loan
- Timeline: 1 to 3 business days
The last step involves signing loan documents, securing insurance (if needed), and completing the closing process. Once the lender disburses the funds, they either go to you or to an escrow account, depending on your loan type.
Can You Speed Up the Funding Process?
While the hard money loan funding timeline is fast already, you may wonder if you can do anything to make it even faster. The answer is yes. There are a few things you can do as a borrower to prepare for the loan and help push it through faster. Here are a few examples.
- Find an Experienced Lender- Finding the right lender can make all the difference. While you’ll want to compare rates and fees, choosing between lenders that specialize in your investment type can help you get funded faster.
- Prepare Documents in Advance- Most hard money lenders need to see a decent amount of paperwork. Having this ready in advance can help speed up the approval process.
- Respond Quickly to Lender Questions- Communication is key if you want the loan process to go quickly and smoothly. You should be available to answer any pressing questions or requests your lender may have. That way, they can work quicker to fund your loan.
- Build a Strong Relationship With a Lender- Building a relationship with a lender who specializes in the loans you need can help you get future loans faster.
Find the Right Lender for Your Project Today
Knowing the hard money loan funding timeline can help you decide whether or not this loan type is for you. If you need a hard money loan for your project, the first step is finding the right lender. You’ll want to look for someone who specializes in your specific project type, whether that’s fix-and-flip or commercial real estate. Compare loan terms, fees, and interest rates to find the best deal.
Are you in the Baltimore area? Look no further than Maryland Hard Money Lenders. Our team of hard money lending professionals can help you get funded quickly and efficiently. Got a project you’re ready to work on? Learn more about our lending process and fill out a loan application today.
