Applying for Hard Money Financing With Low Credit Score? Here is Everything You Need to Know – Part 2
(This is the second part of a 2-part series on the link between bad credit and hard money financing)
One of the most commonly asked questions about hard money is whether or not investors with poor credit can get funds.
Generally speaking, hard money lenders are primarily concerned with an investor’s collateral or property. If an investor defaults on loan payments, the lender will foreclose on the property and resell it as payment.
Along with the after-repair value of a real estate property, your hard money lender will check your experience in real estate investing and how many deals you’ve successfully closed, your assets and your business proposal.
A business proposal will outline information pertaining to your project, including project vision, fund usage, exit strategy and more.
This will help lenders decide whether or not to invest money in your real estate project.
Maintaining good credit will help you acquire a hard money loan or traditional loan, without any issues. However, bad credit will not necessarily disqualify you for a hard money loan.
Hard money lenders are more concerned with the bigger picture rather than a single score. When it comes to credit score, it’s safe to say that hard money lenders are more reasonable than banks. In fact, many investors apply for hard money financing because they fail to qualify for a bank loan due to bad credit.
How To Get A Hard Money Loan Approved with Poor Credit
If you have a bad or low credit score and want to increase your chances of getting a hard money loan, here is what you should do:
Conduct thorough due diligence: Focus on conducting a detailed due diligence in order to demonstrate to a lender the viability of your real estate investment project.
Explain your credit problems: Everyone has credit problems. If you have a bad credit score because of unavoidable financial circumstances, inform your hard money lender. Be honest and open with them. While hard money lenders certainly show leniency than banks to an investor with bad credit, this doesn’t mean that they will not care about your credit history at all.
The bottom line:
Hard money financing is available to borrowers with low or poor credit. However, a good credit score will help you acquire both traditional and alternative loans quickly.
Looking for a hard money loan Massachusetts? Get in touch with Harper Financial now to help you fund your next deal.