If you're looking for a hard money lender in Maryland, you're in the right place! The purpose of this article is to provide you with a complete understanding of hard money, and why it is so important to select the right hard money lender in order to grow your real estate investing business.
Working with a lender that understands your local market is critical in ensuring the success of your transaction. With offices in Baltimore and Gaithersburg, we take pride in serving hundreds of real estate investors here in Maryland. If you're looking for fix and flip loans or DSCR loans in Maryland, we would love to be your lender.
The term "hard money" refers to a non-bank loan secured by a physical asset -- most commonly real estate. You may have heard the following terms, which all mean the same thing:
Many real estate investors believe there is a difference between a hard money lender and private lender. The truth is, there is no agreed-upon difference based on naming, and they are generally the same concept. You need money for a real estate investment project, the hard money lender or private lender provides you with a loan on terms that are mutually agreeable.
It is impossible to come to a consensus on the difference between hard money and private money. For instance, many in the industry believe that hard money lenders are more corporate, strict and ruthless, while private lenders are more personal, local and small.
There is a major public relations push by private lending associations to phase out the term "hard money" because of the belief that it carries a negative connotation of excessively high interest rates and questionable if not unethical business practices.
Therefore, the term "private lender" is becoming the chosen way in which a growing number of lenders self identify. These same lenders used to identify as "hard money lenders" but are being pressured to discontinue using that term.
OfferMarket, headquartered in Baltimore, operates an industry-leading private lending business that serves hundreds of real estate investors across the state of Maryland. Our clients range from experienced rental property investors and flippers to beginners. We choose to refer to OfferMarket Capital as a private lender, though we recognize that you could just as easily refer to us as a hard money lender and we are fine with that! What matters to us is not how we are classified, but rather how we support our clients who are building wealth through real estate by revitalizing neighborhoods across the state of Maryland.
Otherwise known as "hard money loans", "bridge loans", "construction loans" or "rehab loans", fix and flip loans are a core offering of hard money lenders. Fix and flip loans are short term, interest-only loans to purchase and renovate distressed real estate.
Your fix and flip loan amount is determined by the after repair value (ARV) of the property. You submit our scope of work which we review and provide to an appraiser in our network. The appraiser inspects the property and determines their opinion of value "as repaired" or "subject to repairs" based on the current condition of the property, the scope of work, and similar houses that have recently sold, "comps".
The initial component of your loan is funded at settlement via a title company of your choosing (we have preferred title companies if you need a recommendation!). These proceeds ultimately pay the seller, and in some cases your closing costs. Interest on this portion of your loan starts accruing as of the date of settlement.
The rehab component of your loan will either be disbursed to you via reimbursement based on draw request, or by advancement based on draw schedule ("advanced draws").
Depending on your selected loan options and your loan amount, you will either pay full boat interest ("dutch interest"), or as disbursed interest.
Since fix and flip loans are interest-only, your principal loan balance is not paid off until you sell or refinance the property. To coordinate your payoff, we provide a payoff statement to your title company to ensure our fix and flip loan is fully repaid and removed from the title of your property.
Fix and flip loans are used by flippers, and rental investors. Flippers have an exit strategy to sell the property for a profit, while rental property investors have an exit strategy of a refinance into a longer term loan, typically a DSCR loan which we will explain below.
At OfferMarket, we believe our best clients are our most informed clients -- it's our responsibility to provide you with transparency to understand how our terms compare to other lenders. That's why we publish the Fix and Flip Loan Interest Rate Index.
Hard money lenders also provide DSCR loans, otherwise known as "rental loans" which are typically 30 year fixed rate, fully amortizing mortgages based on a rental property's cash flow.
DSCR means debt service coverage ratio -- it is a cash flow metric. DSCR of 1 means the property operates at breakeven cash flow. DSCR below 1 means the property generates negative cash flow and the owner needs to pay out of pocket in excess of monthly PITIA to cover the shortfall. DSCR greater than 1 means the property generates positive free cash flow. Most DSCR loan programs require a minimum DSCR of 1.1 in order to qualify for a given LTV (loan amount).
There are a few different ways to calculate DSCR, so please take a moment to review and use our handy DSCR Calculator!
Interest rates for DSCR loans are determined based on the following factors:
The last item, institutional credit investor demand, is what causes interest rates to fluctuate beyond what is in the borrower's control. This is based on a premium to prevailing risk-free rates (i.e. US Treasuries) based on perceived credit in the housing market and broader economy. Ultimately, because the DSCR loan will likely be included in a securitization, the interest rate will be priced based on what the institutional investor determines to be an acceptable rate in exchange for risk.
We publish the DSCR Loan Interest Rate Index in order to provide rental property investors with complete transparency into real-time and historical pricing. This helps you get the best terms for your DSCR loan.
Note: index rates are based on 30 year fixed rate, fully amortizing, 75% LTV, 1.2 DSCR and 720 tri merge credit score. Interest rates are an approximation based on best available nationwide private lender data for competitive rates. Rates are lower at lower LTV and higher credit score.
Lender fees for DSCR loans include:
While it is important to understand all fees charges by hard money lenders for DSCR loans, the origination fee is a common differentiator. Most private lenders charge 2 points, at OfferMarket we typically charge 1 point, as long as the loan amount is $150,000 or higher.
As discussed above, hard money lenders charge some or all the following fees in addition to the interest rate of the loan:
At OfferMarket, we believe that the only acceptable fees are Origination Fee, Underwriting Fee, and Legal/Doc Prep Fee. Admin Fee and Processing Fee are add-ons that should not be necessary.
Being headquartered in Baltimore, MD, we understand the local market. We take the time to review your deal and provide you local market insights and feedback to help ensure your deal is profitable and low risk.
Whether you're investing in Baltimore City or Baltimore County, we know the market and are comfortable making fast decisions to price, approve and fund your loan.
Hard money lenders in Maryland are not required to be licensed (i.e. NMLS) because they provide business purpose loans. Hard money lenders providing loans for investment properties in the state of Maryland cannot use a borrower's primary residence as collateral.
We launched OfferMarket Capital after seeing fist hand, just how uncompetitive and lacking in transparency the vast majority of hard money lenders are. We believe that in order to grow, real estate investors like you need a hard money lender with low fees, high transparency, and remarkable service powered by technology.
Given our local market expertise, commitment to everyday low pricing, dedication to remarkable client service, easy to use online platform, and complimentary services (insurance and off market listings), we are confident that OfferMarket is the best hard money lender in Maryland.
We specialize in fix and flip loans and DSCR loans and our terms are consistently the most competitive in the industry. Our mission is to help you build wealth through real estate and we would love to be your hard money lender. Let's get started today! Get your instant quote and pre-approval or call us at 443 492 9941.
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