Hard/Private Money "Pre-Approval?"

4 Replies

I've bought and sold a number of homes in my life , and even flipped a couple  but I've always used conventional financing. 

Lately I've run across a couple properties on the MLS that's say hard money or cash only , bring proof of financing .

As I understand it, hard or private money depends on the property/deal and not the borrower for approval. So is it possible to get some type of funding commitment when I don't yet know which property I'm interested in?

Thanks

If it comes down to a hard money loan there is a wide variety of lenders out there ranging from professional companies that lend nationwide to your local millionaire that lends out their own money. In my experience dealing with private money is often not the right way to go, too many points and they never close on time. What I have found that works is these companies that advertise themselves as an alternative to hard money. I would list some names but I dont think I am allowed to do that here. I was able to get a pre approval with one of these companies with just a 1003 and an old credit report. 

Originally posted by @Robert Reineri :

I've bought and sold a number of homes in my life , and even flipped a couple  but I've always used conventional financing. 

Lately I've run across a couple properties on the MLS that's say hard money or cash only , bring proof of financing .

As I understand it, hard or private money depends on the property/deal and not the borrower for approval. So is it possible to get some type of funding commitment when I don't yet know which property I'm interested in?

Thanks

 There are levels of hard money. Think about it as risk vs reward for the lender.

  • Your local millionaire might be really easy to work with, provide no more than 65% ARV and charge 14/4. He is able to charge 14/4 because there is no lengthy paperwork, if your deal is good enough you don't have to put any money down, and while it may be expensive, you know he will be there with you at the table for closing.
  • Then you have your nationwide lender that offers 7-10% rates with 2 or less points. Typically, this requires more documentation - credit becomes a concern, assets may be a concern, your experience might help them. You might get more funding, but the deal is much more secure because the lender is not only vetting the property, but also vetting you as a borrower.

Of course, there is everything in the middle, even more in each other direction.

My point here is, that each of these lenders will "qualify you" in some way. My company typically requires a credit check and verbal agreement to terms. Nobody wants to waste time - for example, you shouldn't put offers on a commercial property if your lender only lends on residential properties... etc.

@Robert Reineri Its possible to get a pre approval letter. You can submit an application with a property you have in mind and give some detail on your plans and a HML will be able to send you a pre approval letter.