When it comes to purchasing a luxury property as a real estate investment, the ability to access financing can be a daunting task. A hard money jumbo loan can be a great way to finance the purchase of a property for those who don’t qualify for a traditional loan, or for when the interest-only nature of a hard money jumbo loan is better suited for a project’s profitability.
There are some common misconceptions about jumbo loans, so to cut through the noise and bring clarity to any confusion, this article will cover the following:
- What is a hard money jumbo loan?
- How does a hard money jumbo loan differ from a conventional jumbo loan, and what are the key benefits?
- What types of properties are hard money jumbo loans best suited for financing?
- Why is it possible for a hard money jumbo loan to be more palatable for investors, despite higher interest and fees?
First, let’s break down a few important terms:
A Hard Money Loan is secured by real property and typically provided by non-traditional lenders. These types of loans are often used to purchase investment properties that are too difficult for a borrower to qualify for using a traditional mortgage loan.
A Jumbo Loan is a type of mortgage used to finance loan amounts greater than a conventional conforming loan limit. While seemingly straightforward, a conventional jumbo loan is not ideal for most real estate investors.
Combine these two and you have Hard Money Jumbo Loans which provide a way for borrowers to access financing for a highly desirable property. In most cases, hard money jumbo loans require a bit more of a down payment, higher interest rates and shorter loan terms. These loan terms are shorter than traditional loans and provide borrowers with access to financing that they would not otherwise have. When it comes to Hard Money Jumbo Loans, borrowers should understand there may be unique loan terms and conditions that come along with them. Typically, this may include slightly higher interest rates and fees than traditional lenders, however the cost may be palatable for many borrowers due to the increased flexibility surrounding credit and income qualification. For investors looking to purchase a luxury property, a Hard Money Jumbo Loan can be a great way to access financing. By understanding the associated loan terms, potential borrowers can make an informed decision on whether its the best option.
Jumbo private money loans are in high demand today, more than ever, when it comes to financing high-dollar investment properties. Albeit the non-traditional route for jumbo loans, this type of loan solves for some of the major pain points of a non-conforming conventional mortgage.
- Easy qualification: Stated income and assets, along with lower FICOs, make the approval process a breeze. W-2s are not needed, which means debt-to-income (DTI) is not an issue.
- Portfolio growth: Since DTI is not a factor for qualification, investors are able to take out multiple loans for different investment properties, allowing them to extend leverage without tying up their cash.
- Higher leverage: Compared to conventional lenders’ 65% max LTV for jumbo loans, expect up to 80% loan-to-value (LTV) with jumbo private money loans.
- Maximized equity: Some private lenders such as CV3 Financial Services can combine up to 10 properties under one single loan. With no limit of loans, this is a great strategy to recapitalize on your healthy equity and grow your real estate wealth.
This type of loan opens the door for investors to tap into luxury and competitive markets, to make the right offer when an opportunity presents itself, and to do so with faster timelines and less stringent criteria. Get ahead of the competing offers and set yourself up for a jumbo success by securing a jumbo private money loan on deck as a funding source for your real estate investing strategy.