Qualifying for a Hard Money Loan

Posted by Shawn Molem on July 24th, 2017

Qualifying for hard money loans tends to be more straight forward than traditional loans. When looking at hard money loans, remember that hard money lenders are themselves investors. When hard money lenders evaluate loan opportunities they are looking to maximize returns and minimize risk – just like every investor. While hard money lenders would love their borrowers to have great credit, it isn’t the number one factor they use to evaluate lending opportunities. The top factors hard money lenders tend to look at are property fundamentals and equity. They want to know that in the event the borrower defaults and they have to foreclose on the property, that they will be able to recover their investment. They will look at things like the rental marketability of a property, cash flow, and so on. This is great for investors, because if you find a great investment opportunity, it is likely something that hard money lenders are going to be willing to fund.

Along with property fundamentals, hard money lenders are also looking for equity. Typically hard money lenders aren’t going to lend more than 70% of a property’s LTV. For investors, though, there are hard money lenders that will lend based on repaired or remodeled value. Again, hard money lenders can be a lot more flexible than traditional lenders. As long as an investment makes sense to a hard money lenders, they may fund the deal. They certainly have some guidelines they like to use and keep to, however, at the end of the day they can be flexible if they see an investment opportunity that makes sense.