What criteria do Hard Money Lenders look at?

Question

Just wanted to get a grasp of what criteria Hard Money Lenders look at when qualifying someone for a loan. I know experience is a big factor, but what about DTI? Credit? and any other needs I need to prep for when going this route.

Mike Klarman · Answer

So they will do a soft pull or hard pull on your credit, they will look at your credit history and also your b.g.

All that matters is the cash you have on hand, not what you make per year.

I start new investors every year. If your credit is 680 or better, no lates on your credit report, and a clean b.g. and I can get a new investor started all day long given it is the right project.

The right beginner project is one where the purchase price is less than 100k, total project cost less than 200k and loan amount around 120k - 150k. Quick cosmetic rehab in an active sales market.

The borrower profile has lots to do with it but so does the asset profile. If a new investor comes in with a 300k purchase and a 200k rehab in a high end market where it will take 3 months to sell, a lender will not be so hot to lend a newbie in that situation.

Michael Braswell · Answer

Hard money lenders do not care about your DTI but do want to know if you have the down payment, closing costs, and 25% of rehab budget to get started. We look primarily at the property and the numbers to determine if it is a good deal. 90% of underwriting is based on the property not the borrower. Use this equation to evaluate how much to offer on a property:

Max offer = After Repair Value x 70% - Rehab Budget

Do you homework on comps to get a good idea on the ARV. Find 3 solid comps that have sold as close to the house as possible within the last 3-6 months.

Set a realistic rehab budget (ask other investors how much does it cost them to renovate a house based on price per sq ft).

Plug in the ARV and rehab budget and DO NOT offer more than this number. You make money on the purchase not on the sell of the property. A lender will fund your deal if you know your numbers.

Ryan Davies · Answer

Here is how most work:

• • Rates: 9% to 13% (Most Deals are 11-12%)
• Terms: up to 36 Months (Most Deals are 6-12 months)
• Fees: 2-4 points(%) of loan amount paid at closing (Most Deals are 3 points(%))
• Minimum Loan Amount: $50,000 (For loans less than $250,000 $2,500 minimum fee)
• Max Loan: 65%-70% of After Repair Value(ARV)
• 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)
• Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 2 Weeks)
• NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.

Mike Klarman · Answer

1) Credit

2) B.G.

3) Experience

4) Capital

Truth is, with decent credit and the capital required, you can get in and get started.

Erik Estrada · Answer

Most Hard Money lenders will look at reserves, cash to close, experience, and sometimes credit. It depends on the LTV. If it's 65%, they won't care about credit.

Logan Singleton · Answer

Hard Money Lenders will look at a few things depending on whether you're applying for bridge or DSCR financing, but primarily your FICO, LTC/ LTV, DSCR, and Location.

What criteria do Hard Money Lenders look at?

What criteria do Hard Money Lenders look at?

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