Hard Money Lenders
When are hard money, subprime, bad credit, and high risk lenders used?
Anytime a traditional lender, also known as a conforming lender, will not approve your mortgage requests. This may be due to low FICO scores; recent bankruptcy; a balloon payment on an existing loan that is due now or even past due; inability to verify income, tax returns, bank statements, etc.; high debt to income ratios; a need for emergency cash quickly; odd or non-conforming types of properties, such as mixed use, multiple units, apartments, land, etc. You must own real estate or be purchasing real estate to use a hard money, subprime, high risk & bad credit lender .
Why will hard money lenders approve my mortgage when others will not?
These lenders understand the real estate market, real estate loans and mortgages and are looking for a safe and secure investment. Since these types of mortgages are secured by a property with at least 10-30% equity, the lender is better protected and receives the benefit of the higher interest rate return. The interest rate you will pay will be higher than a conforming mortgage lender will offer you. The greater the risk for the lender, the higher the interest rate for you. Often, you will need a hard money lender to get a mortgage approval if you fall outside of normal guidelines. However, this does not mean that down the road you cannot qualify for a conforming mortgage.
Do I need to provide all my documentation regarding income, bills, etc?
This varies from lender to lender, but typically you will only need to provide minimum documentation to obtain the mortgage loan. There are many different options. Some lenders will not require income tax returns, but may look at your bank statements to verify your income. Or you may not need to provide any income documentation at all, and get a no income mortgage approval. Each hard money lender will look at the whole picture and determine if it is a mortgage that makes sense to approve.
What if I have damaged or bad credit with a low FICO score?
This is often the reason a borrower will need to go to a hard money lender. These types of mortgages are usually used by individuals with past, recent, or current credit issues to rebuild their credit and eventually refinance to a more traditional type loan. FICO scores are used by all mortgage lenders to determine creditworthiness. Conforming lenders want to see a credit score of usually 640 and higher. High risk lenders will look at credit scores as low as 500! It maybe be possible to get a mortgage approval even with a credit score under 500, but will often require a private investor. A private investor is an individual who lends out their own funds.
|
