If you need a loan to buy or fix a property, you might wonder: Should I get a hard or conventional loan? The answer depends on your situation. Both loans can help you get the money you need, but work differently.
What Is a Conventional Loan?
A conventional loan is a mortgage offered by banks, credit unions, or lenders. The government does not back it. You usually need good credit, steady income, and a down payment to get one. These loans often come with lower interest rates and longer terms.
Good For:
- Buying a home to live in
- Borrowers with good credit
- People who want lower monthly payments
What Is a Hard Money Loan?
A hard money loan is a short-term loan from a private lender. Real estate investors mostly use it. Instead of looking at your credit, the lender looks at the property’s value. Hard money loans are fast to get, but they have higher interest rates and shorter terms.
Good For:
- House flippers
- Real estate investors
- People who need money quickly
Key Differences Between Hard Money and Conventional Loans
| Feature | Hard Money Loan | Conventional Loan |
| Based on | Property value | Credit, income, history |
| Approval time | A few days | A few weeks |
| Term | 6-24 months | 15-30 years |
| Interest rates | High | Lower |
| Down payment | Often higher | Can be as low as 3% |
Pros and Cons
Hard Money Loans
Pros:
- Fast approval
- Easier to qualify
- Great for investment properties
Cons:
- High interest rates
- Short repayment time
- Not for long-term use
Conventional Loans
Pros:
- Low interest rates
- Long repayment period
- Great for primary homes
Cons:
- Takes longer to close
- Requires good credit
- More paperwork
Which One Do You Need?
If you’re buying a home to live in and have strong credit, a conventional loan is likely your best option. You’ll get a better rate and more time to repay.
If you’re an investor, flipping a house, or need money fast, a hard money loan might make more sense.
Think about your goals. Are you planning to live in the home? Go with conventional. Are you buying to flip or rent out soon? A hard money loan could be the right tool.
Pick the Loan That Fits Your Plan
Hard money and conventional loans serve a purpose, but work best in different situations. If you need fast funding for a short-term investment, hard money could be the right move. A traditional route might be better if you’re buying a home to live in and want a lower rate and more time to pay it off. The most important step is working with someone who understands both options and can explain what fits your needs.
If you want expert guidance to help you move forward, speak with our team that knows the local market. Getting the right loan starts with having the right people on your side.