You’d think more nationwide companies would provide this type of financing but that’s not the case. As we see with other types of loans, most companies specialize in specific areas. Many applicants find themselves in a situation where they need a hard money loan. Unfortunately, the available options aren’t much to speak of at this time. Texas generally has less regulations versus other states. But most banks are going to be risk averse when it comes to working with someone who doesn’t qualify for traditional financing.
We all know that big banks and credit unions are out to make a profit. A handful of the largest banks in the country account for the vast majority of traditional mortgage loans. In Dallas and Houston alone there’s a huge concentration of mortgage lenders that process thousands of online loans a month. Many of these companies can provide you with a refinance or cash out, but it’s going to be the same qualification standards as a normal mortgage. You may wonder why these firms don’t create a lending option for consumers in need of private lending options. The reasons for this lack of financing are obvious. Most banks have a streamlined process in place that requires real estate applicants who can check off all the requirements. They’re going to check your credit history and employment information. They will check references and past lending data to ensure you are a top candidate. It’s a stark contrast when compared to someone who’s looking for a hard money loan. Applicants who need a private lender find themselves in a unique situation. Many can’t verify their lending history and have past credit issues. Others are self employed or have a strange employment situation where their income can not be verified. For this reason borrowers turn to online companies that provide hard money loans in Texas.
Another reason why it’s difficult to find private money financing is the fact that most banks and mortgage lenders have a lengthy qualification process. This has become more of a problem over the past few years as increased regulations have been put into pace. Factor in new rules like the Dodd-Frank Act and you’re easily looking at more paperwork and info that will be required. While their applications are streamlined it doesn’t mean they can push funding through in a matter of days or weeks. We also see unique issues here in Texas where city and county restrictions can further complicate the funding and underwriting period. One of the biggest reasons in why people apply for private money loans is because they can be processed much quicker. It’s not uncommon to see a private money loan finalized in Texas in a few days or weeks. Compare that to most large lenders that will need to check employment, banking and other verification information. Some large lenders and state chartered banks have been known to drag their feet and slow down the funding process. If you believe a bank is operating in bad faith you can submit a complaint online to the Texas Department of Banking. Besides the common factors a private lender will also need to ensure you can make future payments and have enough money set aside in case of a financial emergency. While each company is different it can be weeks or months to see an approval with a typical company.