Finance
What is 'hard money lender' versus 'private money lender' distinction in Hawaii real estate investing?
AA. Hard money and private money are identical; both terms refer to the same type of lender
BB. Hard money refers to asset-based loans from professional lending companies; private money refers to loans from individuals (family, friends, private investors) who may be more flexible on terms✓ Correct
CC. Hard money has lower rates than private money in Hawaii
DD. Private money is a government program; hard money is a private sector product
Explanation
While often used interchangeably, some distinguish: hard money comes from professional companies specializing in asset-based lending with standardized programs; private money comes from individuals who may be more flexible but less standardized. Both offer faster closings and less strict qualifications than banks.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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