Depending on your financial situation, there may be times when a conventional lender doesn’t suit your needs. Whether the interest rates don’t align with what you were hoping to find, or if you’re having trouble getting approved at a bank or credit union, alternative funding solutions are available. If it feels like you have nowhere else to turn, then you may be the perfect candidate to work with an alternative funding provider.
Know When You Need One
Before looking into alternative funding, you’ll want to decide when the time is right. Are you hoping for a quick closing process? Are you purchasing a property in need of repair? Do you not have the necessary down payment and need a partner to help you cover it? Maybe you don’t qualify for, or have any interest, in a conventional loan? If you find yourself in any of these situations, it may be time to start looking at alternative funding, or a “hard money” loan.
Understand Your Circumstances
The need for alternative funding can apply to a multitude of situations. For investors planning on flipping a home (reselling it for a profit after fixing it up), this loan can be relatively easy to get and may be the best fit for you. A distressed property often isn’t considered “move-in ready,” so it can’t be financed through a conventional lender.
If you’re hoping to purchase a primary residence, but you have credit issues or difficulty with documenting income, hard money loans may be an option, along with a significant down payment.
Think about how quick of a turnaround you’d prefer. Alternative funding sources often have the ability to close loans faster than traditional lenders or banks. Your request may only need to be approved by one decision-maker, which could make the process go a lot smoother.
Although alternative funding solutions may seem more expensive than loans from a bank or credit union, they may still provide the best option for your situation. Alternative lenders are eager to make a commercial loan work for you, and it’s not uncommon for an investor to receive a home loan with little or no money out of pocket. An alternative funding arrangement may also help the buyer avoid paying up 50 percent of their profits to a financial partner.
Find the Right Source
Find an alternative funding source you can trust and be sure to weigh your options. Research the different funding solutions in your area to consider who can best help you secure the loan that’s right for you — and your budget.