Hard Money Lender asking for 15% Reserves after closing costs

[Jerel Davis]

Just a little rant:

My hard money lender says I have enough to make a deal work with the money I have to bring to closing. I can afford the holding costs.. but they won’t approve it because they want to see I have an extra 15% of purchase price in cash as reserves.

I’ve got enough money to buy, to repair, to hold, but not enough liquid funds as “cushion”. This is frustrating..

They asked me to go find another 20k for reserves and show a proof of funds so they have more piece of mind. They even explained I might not need the extra 20k for the house but they’d like to see I can find it.

I get that they want to mitigate risks. I’m so stressed that I have to find a way to post 20k in my account on such short notice.

I’ve never been at this level of “pay to play” before and it’s exciting, frustrating, and terrifying. If this offer I already submitted gets accepted, I’ve got 15 days to make all this work and close.

[Geordy Rostad]

@Jerel Davis

It could be a regional custom or it could be common and I just don't know.

One of the HML's here doesn't care what you bring them as long as you have 25% cash in it. They don't mind taking them back when it turns sour.

Another one says "we aren't like those guys, we've only taken back .5% of all our deals".

One I'm working with now asked for pretty much all my docs just like a bank but the application was pretty simple. It was sort of a grueling qualification process but they are 10% down and charge 10% interest which is lower than the first two guys I mentioned. I'm sure they saw that I have 15% reserves and just didn't mention to me that it was any sort of requirement. 

They make their own rules. There's not really a standard.