Advantages and Disadvantages of Obtaining your Texas Commercial Mortgage from Traditional and Private Hard Money Lenders

Traditional Texas Commercial Real Estate and private hard money lenders differ in their requirements and funding strategy. Here are just a few of their unique characteristics that may help you determine which Texas Commercial Mortgage is right for your next real estate venture.

When you think of funding for your first or next real estate investment project, your thoughts often turn to traditional lenders such as banks and credit unions. These Texas Commercial Real Estate lenders definitely have their place in the funding scheme of things. They do, however, carry some disadvantages as well. In order to determine just which funding source is best for you, let’s take a look at what they have to offer.

The pros include Texas Commercial Mortgage interest rates, length of term, and loan qualifications. Most traditional lenders have strict qualifying guidelines and long terms. These give them the ability to offer lower interest rates. Because of these high-qualifying guidelines, it also lowers your risk of default. The disadvantages, on the other hand, are actually similar to their benefits.

These same strict qualifying requirements make it difficult for some individuals and businesses to get loans. This may be due to credit scores beneath 700, a high debt-to-income ratio, or self-employment that makes it difficult to verify income. There is also a cap on the number of properties that real estate investors can own at one time, and the approval and funding process can take over a month before capital is obtained. There goes the foreclosed property that just came on the market. In addition, they have high prepayment penalties and regulations regarding the types and conditions of the properties that they can make Texas Commercial Mortgages on. Basically, they are constrained by red tape.

Private Hard Money Lenders

The pros of private hard money lenders are reflective in their less stringent qualifying guidelines. Theirs is an asset-based lending model meaning they will look to the property and your assets more than your credit score and income. They also consider your equity, experience and exit strategy. Approval can occur in as little as 24 hours with Texas Commercial Mortgages typically funded within a week to a few days. This allows investors to act quickly when a prized property hits the market. They also offer interest-only payments until the project is completed. Private hard money lenders will also fund projects that traditional lenders will not consider. For instance, these types of lenders will consider a property with major electrical or plumbing issues as long as all the numbers come out. Their fix-and-flip loans are popular because they offer short-term loans and no prepayment penalties. Because of their short-term nature, the higher risk and the convenience, hard money loans often carry a higher interest rate than bank loans.

Private hard money lenders offer quick funding and interest-only payments.

At Level 4 Funding we pride ourselves on our professional service. Many of our clients are repeat borrowers, coming to us for many of their lending needs time and again. Call us today to see if we have the right loan for your next project.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.