Hard Money Loan Question

4 Replies

As with a lot of things...it depends. I say that as some HMLs are strictly collateral-based and thus need you to have a property identified first. Otherwise, there are HMLs who operate based off of credit, DTI/DSCR ratios, etc., and in those cases you can seek out the preapproval first as it is more based on you as the borrower.

Preapprovals generally are a benefit as they give you an idea of your buying power and strengthens your offer when pitted against other buyers (as Richard alluded to above). 

Perhaps a good place to start is finding a few lenders who offer competitive financing terms and products in the markets you are targeting. It never hurts to ask, so I encourage you to connect with them to ask if you can obtain a preapproval letter and what that process might look like.

Happy Investing!

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Originally posted by @Shayla Rogers :

Hi all, 

I need some clarity. Should I get a pre approval for a hard money loan before searching for properties. Or do I find the property first? 

Get the pre approval.  The lender can write TBD in the property address line as long as they know what state it's in.

@Shayla Rogers

Most HML will not do a traditional pre-approval. We collect personal and business docs, then verify you have funds available. We then can issue a POF (proof of funds) and give a guideline as to how much you may qualify for.

The deal is the other piece of the puzzle here. it is fairly easy to review the individual or business ahead of time, but the picture is not complete until the deal comes into play. I've had well qualified borrowers not get approved by the lender due to a poor deal, whereas, if the deal is solid as is the borrower, then all is good. HML are more about the deal than you residential lenders. HML is restricted to a box that the property must fit into. Each deal is subjective.