Question by J Storm the Phenomenon: Can I get a Hard Money loan & then Refinance Mortgage on a foreclosure property?
And How do i go about it? I took a brief real estate class and i remember the general discussion of hard money lenders and how they give you a large sum for a short time for things of this nature. I’m thinking about getting my first home but have limited funds and thought of this as an alternative.
Best answer:
Answer by a_khaze
Yes you can get a hard money loan and refinance later but know this, hard money loans are expensive and if you do not structure the deal right you will run into loan seasoning issues with the bank at time of refinancing. So you will have to know who you are getting the money from. Hard money lenders charge as much as 16 points (MAX by Law) and sometimes collect 6 mo interest in advance added to the total you need so if you want to buy a property on foreclosure and end up having paid only 65% of market value you will have to offer about 50-52% of asking price to end up with some equity in the property so you will be able to refi without a problem. If you need more help with this send me an email and I help you set it up the right way so you don’t get burned. (been there, done that)
What do you think? Answer below!
What is the point of using the hard money loan? Having limited funds is no reason to use hard money.
If you intend to occupy the property as your primary residence, you can get max loan to value on the purchase price. Using the FHA loans, you can even get a grant for downpayment assistance from the seller through a non-profit, like Ameridream, as well as assistance with closing costs.
If you can’t qualify for an FHA loan, you would be ill advised to use hard money as you will have a difficult time refinancing the loan and the terms blow.
Avoid hard money like the plague. What you need is a loan officer that is well versed in first time home buyer programs in your area.
If the idea was to somehow cash out on the instant equity you think you are getting by buying a foreclosure, you may not be able to do that for some time after the purchase in order to use the appraised value so this is no argument for using a hard money loan either.
Be smart and good luck.