Well, let’s think about it for a minute. First of all, there is no private mortgage insurance with hard money. There isn’t any upfront MIP either, which is typically 1.85% of the loan amount. Hmmm, that is almost 2 points! Hard money is typically 5 points. So that leaves a 3% cost for the loan. Most people are aware that brokers are limited to 2.75% in points on a traditional loan, but mortgage bankers do not have such a limit. They can charge the borrower 1% plus underwriting, plus broker fee, plus, plus, plus. And a hard money loan is usually going to have a much lower loan amount than an FHA or Fannie Mae loan, so the amount the broker gets is less than a broker/banker gets on a traditional loan.
Hard money is way cheaper than using your credit card to buy a house. Most credit cards are between 18 and 29% nowadays. Hard money is typically between 8 and 14%. And let’s think about the headache involved with a traditional loan. The miles of paperwork, the crazy questions from the underwriter (like she didn’t even read your file first), the possibility of losing your earnest money because you get turned down at the last minute. At Capella you will usually know within the first phone call if you are approved, especially if you talk to Corinne or Matthew, the owners. Otherwise, it will be about 24 hours.
How about trying to get an underwriter to understand why your bank statements show one thing, but your tax returns show another? Hard money and soft money don’t have those types of problems. Sure, there are some requirements that you need to meet (like proof that you really can pay the mortgage payment), but it is about 80% less stressful than a traditional loan.
Try hard money. You’ll like it.