I think it is becoming more common for hard money lenders to at least look at the credit of the principals involved. It may not be a part of the underwriting decision, but if the person(s) have a proven track record of taking others’ money and not returning it, even a hard money lender might question whether or not to get involved. A hard money lender, like any other lender, doesn’t really want the property. They want their money back, with interest. If you are a deadbeat, and you get a hard money loan at a low LTV, the lender is protected pretty well by the equity in the property. But if you are not a deadbeat, and borrow at the same low LTV, the lender is arguably protected better. Make sense?
I have been a hard money lender in the past – with my own personal funds – and made one TERRIBLE mistake when I did not look at the borrower’s credit history in enough detail. Although I eventually got my money back, I lost much of the hoped-for gain and it was returned only after 18 months of working through the legal system. So I cannot blame anyone who lends money to anyone else under pretty much any conditions wanting to check the credit of the borrower.
I don’t think that merely looking at credit means a lender is not a “hard money lender”. I think a lot of the common tactics of “conventional” lenders, such as changing the interest rate based upon credit, would not be considered hard money lending.
Beyond that, each lender will have their own policies as to fees, points, and the like. If you are expecting someone to put up all the money, including closing costs, so that you get into the deal with not one red cent out of your own pocket, good luck looking! If you find one like that, post it here!
Posted by Ed Garcia on March 05, 2001 at 09:37:48:
Looking for Hard Money
Ed Garcia goes on a Hard Money Campaign?
As of today thru Friday February 16th of this week, we will be conducting a Hard Money search.
This is a ONE TIME EVENT ONLY?..
If you are a Hard Money Lender in your state, or you’ve used a Hard Money Lender, we would like their name, address, and phone number, along with a little explanation of how they have served you.
This search will be conducted on the “FINANCING FORUM” section of this site ONLY.
If you are a Hard Money Lender, this is your opportunity to tell us what you can do.
Explanation:
I don’t think that it’s a secret that I have been designated as the sites lender. In order to do this job efficiently, I need HARD MONEY. I have all I need in California, but fall short in other states. Hard Money has been the most sought after financing on a state by state basis. I’m looking for credible, legitimate, sources. I, or one of the members of my staff will check out these sources and scrutinize them, one by one. I’m looking to establish a credible Hard Money Lender in each state. This site has been constantly solicited by Mortgage brokers, who have proclaimed themselves to be “Hard Money Lenders” and then have not performed.
I want to thank you in advanced for any participation on your part and hope that the out come will benefit the participants of this forum.
we’ve used Carnegie Capital 2x, we were desperate that’s why and absolutely no other reason. we had to close quickly and put 15-20% dn. Others i know had similar bad experiences eg. extremely high costs 3pts up front 4pts at the end 16% rate and we also had to pay their title/atty expenses. They asked my partner if he needed another loan, we said NO WAY since they refused to lower their cost to lend. Other 2 people had unpleasant cost experiences with them. NOT WORTH THE SMALL NET PROFIT, after the trouble to sell the home. DONT USE THEM.
Another tried to significantly raise the lending costs 2 days b4 promising to close, i managed to get an extra wk and did it thru a friend so i told them to s***w .
Another lender stole my friends deal after promising to lend him the money.
From NYC, i have trouble trusting lenders (too too many promises). Maybe because its one of those cities with the cheap houses in the $160’s and up.
I do not know if I have ever seen a thorough definition of “Hard Money Lender”. I think everyone assumes that a HML should lend on equity only and not require any documentation of the borrower’s financial history. Yet, some lenders with whom I have communicated want about all of the same assurances that a bank does. It seems to me that if a HML needs to eliminate all risk and wants bookoo collateral and financial statements on top of the pure equity in the deal, then they are not truly a Hard Money Lender, but, essentially a banker. Also, shouldn’t a HML include his fees (points), acquisition costs, closing costs, due diligence expenses, surveys, interest, etc. in the proceeds of his loan at the purchase closing so that the entrepreneur/borrower has no out-of-pocket expenses? That seems fair if the HML is working with some LTV that gives him a comfort level in the deal. I suppose each HML has his own way of working, but is there some way to define what should be a NORMAL structure for a hard money loan?
Thanks,
Michael