7 Things That Will Help You Get Approved For Hard Money Loans

Fred Hopkins

Hard Money can be a immediate way to supply everything from residential homes, to industrial properties to new home construction. I will not get into every use of hard money but I will give you a general frame work that your imagination can understand.

For starters a majority of hard money banks will allow you to borrow up to 65% of the value of the home. If it is for rehab purposes, the lender will use the after-repaired value of the house as a frame of reference. I have seen on occasion that went as high as 75% but 65% is the norm.

These loans are per case basis and very flexible so there is a lot of space if the package makes sense. It can be a set back if you are fresh to the game but luckily that can usually be offset with adequate reserves and a good plan of action.

Lets look at an investor rehab loan to visualize how the numbers work.

Lets say you came across a beat up old property in a good neighborhood where homes sell for $100,000. The seller takes you through the home and you determine that it needs approximately $12,000 in updating. You have gotten pre-qualified for the rehab loan and want to know what the maximum you should pay for the property.

Lets keep it basic, you will want to take $100k x 65% - loan costs repair costs/holding costs = Purchase price. Loan costs, for hard money loans, run from 8-13% of the total loan amount. They are not inexpensive but its less money than youll pay to a partner! For now we can assume costs of 10% and holding costs of $2,000. Given those numbers, you probably shouldnt invest more than $45,000 for the house. If you pay more, that will equate to more money out of your pocket to get the deal done.

Here are a few great tips you can utilize to increase the likelihood of being approved for hard money loans, in general:

The more equity in the home after the loan, the better, The higher your credit score, the better The more credit history you have, the better! The more liquid assets you can show that you have personally or have guaranteed access to (lines of credit, partners, rich uncles. . .) the better The more populated the area, the better The faster the properties in the area sell, the better The more solid the appraisal value, the better! A lot of hard money lenders like to use fire sale values as the basis point of the loan so dont be shocked. This is definitely not the time to use stretched values. All in all, this is a numbers game. Dont get attached to a house if the numbers dont benefit you. Hard money lenders can be flexible but bring them a deal where the numbers dont add up and it could cost you a crucial relationship for future investments. Credit doesnt always matter but it does help, tremendously, if you can show good credit history. Fred Hopkins is an 8 year mortgage veteran specializing in hard money loans and mortgage refinancing. For more information on the loan programs he has available, visit http://www.mountaintopmtg.net.