Today’s Secret to Hard Money

Getting a hard money loan is evolving as the rest of the market is changing. What was considered a loan for a hard money lender 6 months or even 3 months ago is not the same today. Until recently, most loan officers and real estate professionals were considering hard money for people who could not document income, had bad credit and/or needed special consideration. As long as enough equity in the property was available then the loan was most likely funded.

In the last three months everything has changed, the economy has taken a sharp downturn and fewer banks are offering financing for both commercial and residential real estate. The lack of available capital to be lended and the economy have made hard money lending one of the primary sources of financing for real estate. Loans that were considered a perfect fit for hard money lenders a few months ago are not anymore. In addition, because of a significant increase in demand the cost of hard money loans has increased by at least one percent on the rate and one point. Were you had 3 points loans today a borrower will pay 4 points.

Due to the increase in demand for hard money, lenders are becoming more and more demanding in regard to the quality of the files they are looking at. For investment properties either commercial or residential property’s income is becoming crucial. Most lenders are now looking at a property real or potential income. Other factors that are going to make a difference are borrower strength you are starting to see more and more files with borrowers that have great credit sometimes above 700. In addition, a property location is going to be important, the better the location the better the LTV.

While, getting hard money is more difficult than it was it is not impossible. Borrowers are realizing that there is a cost for money and that they have to adjust to the new financial reality. The good news is that if you (loan officer, real estate professional) work with a lender that has experience and is flexible most likely you will have an increase chance to make a financing happen. Also, I would recommend for all the party involved to be flexible hard money lending has guideline, but everything is about flexibility.