These are some of the main differences between hard and soft money loans.

Hard Money

1- higher interest rates – typically between 8% and 16%

2- much shorter loan length (term) - 6 to 24 months but can be longer

3- much faster loan approval – typically between 7 and 30 days

4- is given by private lenders/corporations

5- primarily used for real estate investing

6- loan approval mostly based upon the collateral property value

Soft Money

1- lower interest rates – typically between 5% and 8%

2- much longer loan length (term) – 15 to 30 years

3- much slower loan approval – typically between 30 and 60 days or more

4- is given by mortgage companies, banks, and credit unions

5- primarily used for buying a house (mortgage)

6- loan approval mostly based upon your credit score and credit history

The 3 step hard money lending process - A brief overview

The hard money lending process is simple and straightforward as outlined below.

Step 1 - You hire me, and I do the following:

1 - speak with the borrower - start a relationship + gather salient information

2 - send the borrower the pre-loan application and the fee agreement

3 - call lenders get a “Yes” and a terms sheet (LOI = letter of intent)

4 - collect any lender application fee and all relevant documents from the borrower and send these documents to the lender

Step 2 - Lender’s back office goes to work

1 - the loan officer will review all documents

2 - lender will order the title and may order an appraisal if needed, also the borrower can buy a CDNA report

3 - the loan processor will verify that all information on all documents is accurate, true, and correct

4 - the underwriter will underwrite the loan and draft the loan and closing documents and send these documents to the title company for the closing

5 - the closing date is confirmed by all parties and the borrower must attend to personally sign all documents - electronic signatures are not allowed

Step 3 - Closing - The End!!

1 - the lender will send all funds to the title company

2 - the borrower must sign all documents - at this point the borrower becomes the owner of the property

3 - the title company will disburse all funds and close the transaction - the borrower gets the funds and the broker gets paid - The End!!