A Brief Deliberation about SBA Loans, Hard Money Loans, & Conventional Loans

SBA & Hard Money Loans

Government agencies like the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA) don't guarantee or insure mortgage financing or conventional financing. Thus, for banks these types of loans are flagged as 'high risk' loans with stringent criteria to qualify. The terms and rate of the mortgage are fixed. 

Notwithstanding the fact that while applying for the mortgage, the options that are available could be confusing, generally for majority of people conventional financing is appropriate. No two situations are similar; what is good for the goose may not be good for the gander. Hence, each individual has to take a decision as to whether or not conventional loan would be the prefect choice. Loans are sanctioned in no time if an applicant were to avail different categories of mortgage offerings. 

A down payment is mandatory in conventional financing unlike any other type of mortgage financing. Mortgages that are insured by the government have relatively lower upfront payment requirements enabling new homeowners to shift to their new home. 
There are two broad categories of conventional financing; conforming or non-conforming. A conforming conventional loan is one that specifies an optimum loan amount when the applicant is a single family. When you are purchasing a multi-family home. Non-conforming conventional loans have a much higher limit of loan amount, and the applicants are typically multi-family. They are also known as a jumbo loan.

The greatest advantage of conventional financing is that if the upfront payment is nominal in relation to the market price of the home, lending institutions would need the loan applicant to buy private insurance on conventional mortgages. If the loan applicant has any other type of mortgage other than private mortgage, the loan applicant would be required to pay premium on insurance premium. 

A hard money loan on the other hand, is a loan based on a specific asset. In other words, the asset is used as collateral for the loan and the bank would have a lien on the asset. What this means is that if the borrower defaults on equal monthly installment payments then the lending bank can seize the specific asset against which the loan was taken/granted/sanctioned. 

Simply put, hard money loans or funds can be secured by putting physical asset as guarantee. Private investors and companies typically issue hard money loans, the amount being the same value as the collateral to fulfill short term funds requirements of the borrower. In terms of the interest rate on hard money loans, it’s calculated by taking into consideration the asset that has been put up as collateral and whether the borrower is a first-time borrower or is an experienced borrower. These are primarily the factors that affect the interest rate of a hard money loan. There is a loan fee that a borrower of a hard money loan would have to pay as well.

Hard money loans are also known as 'bridge loans' for the short-term and the lending banks are the lenders of 'last resort'.

SBA Loan, Hard Money Loans - Minercapitalfunding Build your loan experience smoother by offering hard money, SBA loan, conventional loans etc from Minercapitafunding LLC. Call us now, (702)-466-8952.