Hard Money Lenders

3 Replies

has anybody ever used a hard money lender to secure downpayment for an investment property. 

Also, can someone explain to me how hard money lending works 

Thank you

That won't work. HML's usually lend only in first position. Conventional lenders typically do not allow the down payment to be borrowed.

HMLs are high rate, short terms loans. Typically 4+/- points, 15%+/- interest. Typically 6-12 months maximum. They will end on properties too crummy for conventional. They may lend you some or all of the rehab budget. They may lend based on ARV rather than just the purchase price. Some will lend even if you have poor credit, if the deal is good enough.

Hi @Jaime Botello - yes, Jon is completely right, I've never seen my company or any other lend on the downpayment. I'm not sure if you're referring to the EMD or the 20-30% down required in addition to a loan. Either way, there is always going to be some balance that the borrower needs to be able to cover as "skin in the game". For example, on flip loans, we finance between 70 and 80% of the Purchase price + 100% of the rehab, that leaves between 20-30% of the purchase price that the borrower is responsible for. However, this can be covered by numerous methods. This balance can be paid via borrower's personal capital, other investors' capital, second mortgage or Gap lenders, Seller financing/carry back, cross collateral, etc. Therefore, it is POSSIBLE to get the project going with no money out of pocket (or a very low amount), but it can be difficult to obtain all the moving pieces. Also, not all HMLs will allow 2nd position loans behind theirs. We allow any of form of paying that down payment, but that isn't always the case, so be sure to confirm with your lender. Furthermore, try to have all these variables in place prior to finalizing the loan with your main HML. Hope this helps. - Ben

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