How To Use Hard Money As Cash (2024)

Win with hard money in this crazy real estate market

In today’s ultra competitive market, you can use hard money the same way as you can use cash. Cash is king in the world of real estate!

The sellers who accept cash offers are seeking a quick and easy sale of their property and do not want to wait for the slow loans of their buyers to fund. By making cash offers using hard money, it can increase the odds of getting an offer accepted on a home purchase.

A hard money loan is similar to an “all cash offer” to the seller because of the speed of funding. You can close a hard money loan in as fast as 24 hours in some cases.

Real estate investors bypass traditional mortgage lenders all the time by making cash offers using hard money.

Why hard money is same as a cash offer on house

When purchasing a property, making an all cash offer can be the key to getting a good real estate deal under contract. But if you don’t have all the cash, how do you use a hard money loan like cash?

Hard money loans are asset-based loans. This means they are not approved based on your personal credit score but rather based on the property that is used to secure the loan. And once approved, a hard money loan can typically fund in less than a week, just like cash. This is why a hard money loan acts the same as, or very similar to, an all cash offer

How to Write a Cash Offer Using Hard Money

Here’s how a buyer can make a cash offer using a hard money loan in 3 easy steps:

Step 1. Get pre approved by a hard money lender

Step 2. Identify the property you want to purchase

Step 3. Submit your offer to purchase and write on the offer, “cash and hard money.” There is no financing or appraisal deadline. The settlement date would be shortly after the due diligence deadline ends. Suggest a title or escrow company as your settlement agent on the contract.

What Real Estate Agents Should Know About Writing an Offer Using Hard Money Loans

Realtors must know how to submit offers using hard money to help their clients get more properties under contract.

Here are 3 easy steps for a realtor to write an offer to purchase a property using hard money.

Step 1: Get a proof of funds letter from the chosen hard money lender.

Step 2: When writing up the offer, under the section that lists how you intend to pay for purchase. Write in the amount of the earnest money deposit.

Step 3: Then write, “N/A” next to “New Loan”. Then write the words “cash and hard money” next to where it lists the balance due in cash at settlement when you subtract the amount of the earnest money deposit.

Step 3: In the “financing and appraisal condition” sections of the contract, make sure it says that the purchase of the property is NOT contingent on financing approval, and is also NOT contingent on an appraisal. Most hard money lenders will pre approve you for a purchase and most do not require an appraisal. Make sure your hard money lender does NOT require an appraisal. If the lender does require an appraisal, it no longer would be the same as cash. Because it takes much longer to get an appraisal, it won’t be able to match the speed of a cash purchase if there’s an appraisal requirement.

Paying back the loan

A hard money lender will give you a specific loan term, which is the time you will have the loan until it is to be paid back. For example, a 6 month term, a 12 month term, or a 24 month term. You will make monthly payments to the hard money lender for the duration of the loan term, or until the date until you pay the loan back.

You only pay interest as you go, so you only owe interest for the time you have the loan. For example if you have a loan term of 12 months but you pay the loan off in 9 months, you only pay interest for 9 months for the time you have the loan. Most lenders do not have early pay off penalties but always ask if there is a penalty should you pay the loan off before the due date. Learn more about ext plans here.

What are the Closing Costs and Interest Rates?

A borrower can expect to pay closing costs of between 2-3% of the loan amount on average. Also part of a borrower’s closing costs would be a loan origination fee or loan points. The interest rates on a hard money loan usually depend on the size of the down payment on a purchase and range from 9% to 12%.

Conclusion

The hard money loan is a cash offer on a house. You don’t need to worry about credit score, long wait times for funding, or other traditional mortgage requirements that banks typically require.

It’s easy for real estate agents and sellers to get started with a hard money loan through our team of experts a Private Money Utah!

If you’re ready to buy now but can’t wait weeks or months while waiting on a bank approval, contact us today and let’s get the process started together!

Let’s talk more about how we could help you pay back this quick closing fund as fast as week by providing an affordable monthly payment option.

Contact us today so we can answer all your questions before making any long term commitments.

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