How to get Hard Money Loans without experience

14 Replies

For sure, lots of hard money lenders like to work with first time fix and flip investors.  When you say "trying to qualify for a hard money loan" I don't think you've talked to any actual hard money lenders.... true hard money is asset based, that's the "hard" part of hard money.  No qualifications needed, just a property that makes sense to lend on.

There are HML that do give loans to first time investors. The only downside is that the terms are not as good compared to what an experienced investor would get. You need more skin in the game, higher interest, and more points.

I like to point folks to Lendinghomes website they have a great matrix on pricing based on experience.. you can pop on there and most every other FOR REAL HML will follow suit with what they are doing.. Generally speaking though you just need a lot more cash into the deal. And for sure in an area like PA NJ NY etc with the really really long times lines for foreclosures the lenders have to be this way..

Per my experience when I was looking to lend money from any HML most of them did not want to lend me money because I did not have an LLC even I had an experience of completed few flips at this time. The only one HML I was able to find to work with was Finance of America Commercial who agreed to lend me money. They also told me if I would have LLC they would increase substantially the amount of money I can use. Per my information they work with first time fix and flip investors, however the interest rate can be higher than for experienced investors as well as some specific requirements such as put down more investor's own money into potential deal and some other. I work with FACO more than 3 years so far, and highly recommend them. I can provide you a contact with whom I work directly in FACO.

 

You simply have to put more down in order to get the loan. Different lenders have different requirements as to determine who is Experienced and who is not. One lender I know  requires three provable transactions to be Considered experienced. That’s kind of easy and kind of depressing at the same time. Seems like no matter how many deals you do once a person hits three deals their right beside you getting the same terms. Of course all this is assuming you have reasonable credit, no recent bankruptcies or foreclosures and money in the bank.

Daniel,

Unfortunately, based on my experience, you will need 20% down in order to qualify for a majority of HMLs out there. Additionally, you will likely have to pay 2 points and get around a 10% interest rate. Pretty difficult terms for a new real estate investor. The other option you can use is a 3.5% down FHA or a 203K loan if you are planning on living in it for at least 12 months and get a bride or construction loan to fund the rehab.

Hope this helps,

Tim

Daniel, 

Any chance you are in Denver? Merchants Mortgage is only 10% down and 1.75% Orig fee with no experience, except I am a very experienced broker. They did say terms would change the more I flipped. I love them as a HML but they are just in the city...I've been trying to find a similar situation that will cover the mountains.

Hi @Daniel Smith it is definitely hard to get a hard money loan for your first deal. Try Lima One - they are a nationwide hard money lender out of South Carolina. They might be interested. Your other option may be to partner/JV with someone that is more experienced. Hard money lenders are looking to limit their risk, but remember they want to lend. This can help you to get the experience that you need.

Daniel, 

Any chance you are in Denver? Merchants Mortgage is only 10% down and 1.75% Orig fee with no experience, except I am a very experienced broker. They did say terms would change the more I flipped. I love them as a HML but they are just in the city...I've been trying to find a similar situation that will cover the mountains.

Lendinghome lends to flippers with no experience. They charge an origination fee and two points, but will loan up to 90% of the purchase price and 100% of the reno if you have a credit score of 720+. They'll loan up to 80% of the purchase price if you have over a 640. That's their minimum. I'm looking at them for my first flip.