Hard Money Lenders

[rdlloyd 0]

I was told I could get Hard Money for rehabs without regard to my credit. That lenders are more concerned with the after repair appraisal. (60%-70% LTV) Yet, every lender I have spoken to wants to pull my credit. (It's lousy) What's the deal?

[mpine 0]

I was told I could get Hard Money for rehabs without regard to my credit. That lenders are more concerned with the after repair appraisal. (60%-70% LTV) Yet, every lender I have spoken to wants to pull my credit. (It's lousy) What's the deal?

<{POST_SNAPBACK}>

 

Your score is not the most important issue, what is important is the last 12 months. Have you been credit worthy for atleast a year? If so most Hard Money lenders will look past your score.

 

It is also good to work with a mortgage broker for hard money, as you can have 1 person pull your credit, and shop the loan for you without the additional pulls.

 

Best wishes,

 

Michael Pine

First Source Financial USA

[Andrew Ikeda 0]

It sure seems that way, huh? My experience has been that credit will be checked by any and all lenders. This is their key lending criteria. Perhaps you could team up with someone with good credit to obtain a higer LTV (loan to value) or you could go alone with a lesser LTV.

 

I tried to buy property earlier this year using great credit but no sourcing of income and on the strength of the property but the banks and lenders refused.

 

Best of luck! Happy investing.

 

Andrew

[4Rmgt 0]

I would like to address a prevalent myth. Hard money does not necessarily imply that the loan is based solely on the equity of the property in question. This is a very common misunderstanding. Many years ago, private lenders (hard money lenders), used the actual property as its own collateral. If the borrower paid them back, that was great, but if there was ever a default situation, that would be fine too. The lender always loaned far less on the property than the fair market value, so in the long run, a lender stood to make an even greater profit by foreclosing on the property and selling it. So I’m sure that many of you would ask, how is that any different than today? After all, no hard money lender will lend more than 65%-70% of the after repair value on a property, and the high fees and interest rate should more than compensate them for any inconveniences. So what’s the problem? Why is it so hard to find private lenders who don’t ask for credit information? Why won’t they all do “no doc” loans? Where are the real hard money lenders?

 

Well investors, here’s something that you have not considered. Years ago, most states were non-judicial states, meaning that the foreclosure process was simple, fast, inexpensive, and didn’t involve an involved court fight. The burden of proof, in many cases, was on the defaulter. Under these laws, it made sense for the lender to bypass the credit and pay history of the borrower. Either way, their investment was sound.

 

So what happened? Consumer protection laws, and other factors have slowly changed most states into judicial states. Now the burden of proof for the foreclosure process has changed. And to further complicate things, suppose the borrower (real estate investor) rented out the property. With squatter’s laws as they are today, the lender would really be screwed. In these instances, the lender has to go through an expensive and time consuming court procedure. Even though, in the end, the lender will get the house, the expense and effort has killed the investment, and if this happened a lot, it would drive them out of business. And in many cases, this is what happened over the years to most of the equity only based hard money lenders.

 

This is why most of the hard money lenders now will check credit scores, and in most instances, ask for further documentation such as tax returns, bank statements, etc. I find that most private lenders, are much easier to deal with, much more streamlined, and have far less red tape to deal with than a bank or lending institution. The only difference from those “good old days” is that today we are more careful about dealing with just anyone. Speaking for myself, when I work with a real estate investor, I want the legal option to foreclose, but I want to know that the history of the borrower indicates that this is highly unlikely.