Is a Proof of Funds Letter a possibility with bad credit?

Financing, Hard Money Lenders, Private Money
1

Here’s my deal. I’m a work in progress. I went through some tough times and my credit really took a hit. I am continuing to work on my credit and it’s slowly improving. However, I’m also interested in real estate investment, particularly wholesaling. I figure that’s the easiest route given my current situation. Here’s the problem–my current credit crisis is making it impossible for me to get a proof of funds letter to submit with offers on properties. In this area, a proof of funds letter is a must. I’m strictly wholesaling–I’m not planning on holding on to the property and I have worked my exit strategies into the contract with my realtor. So what I’d like to know is are there any alternatives or any hard money lenders who will provide a proof of funds letter if the person’s credit is not so great? I live in Maryland and will be focusing in Maryland (specifically Prince George’s County ). Is there anyone in DC, MD or VA who knows about alternatives? I’ve checked out a couple of transactional funding places on the web that provide the letters, but I have no clue if anyone in the area is using them. If there are people who are using proof of funds from transactional funding sources–how’s that working for you? Any information you can offer would be helpful, doesn’t matter where you’re from if you’ve got useful info.

Thanks
Shania

2

You don’t need good personal credit to get a POF. My guy doesnt run my credit when he gets me one. Many people don’t even check where the POF came from so its really only worth the paper its written on.

Have you actually contacted any HMLs/transactional funders about getting a POF or are you just assuming you can’t get one?

3

I’ve contacted 3 in the Maryland area and they all say my credit scores are too low. I know I can get one from the internet, but this market is really competitive. I felt that going with a local HML would be better. I’m not even looking to flip REO’s. I just want to flip, when feasible, properties listed on the MLS that fit my criteria.

4

If you are looking for some place to say they will give you a hard money letter POF as this is what it sounds to me ?

Yes your credit will come in to play

In most cases a POF is so you can tie up a property and have a end buyer in place at the same time

And this would be a flip and not a buy and hold as it sounds like you are more looking to do ?

With the flip only as a 2 nd deal not the first option

So if you are looking for a POF to give you the cake and ice cream deal you are looking at POF s the wrong way

5

There are two many people calling themselves “Hard Money Lenders” when they are really not. The bottom line is hard money lending is equity based financing. Meaning Hard Money lenders us the value of the property as collateral rather than the strengh of the borrower. Many “so called” hard money lenders are wanting high credit score borrowers along with low loan to value loans.

I think that a True hard money lender shoudl be looking at the value of the property, that is really what hard money is all about.

Shania, you can download a proof of funds letter right from our web site to make offers with if you like what we have to offer. We lend strickly based on the value of the proprty regarless of credit.

6

OKAY You lend based on the value of the property not the credit fine

But where do you lend as in all 50 where ?

7

We lend in 18 states. We feel that these 18 states are best suited for Real Estate Investors.

If you would like to see the States and Counties in those States you can see those on our website.

8

Thanks Ryan for the info, I will definitely check out your site. And thanks to everyone else who replied. I’ve been looking at a lot of options while continuing to rebuild my credit. A few others have suggested using transactional funding, finding a true HML (which is definitely a pain in this market), or talking to private investors. I’ve been looking at everything that I could for the past few days. And no, I’m not looking for the POF to give me a bread and butter deal, I’ll do that with my own research. In the DC, MD and VA areas most real estate agents would like you to submit proof of funds (either a bank statement, letter from the bank, or a lender) before they will submit your offer. I’m not looking to go out and put in offers on 100 properties in a month. I’m looking for deals that those on my buyers list are interested in (which enhances my ability to close), and where the numbers work. I’m a noob, but I don’t think I’m an idiot. Unfortunately, all the guru talk about wholesaling with no money down and no credit don’t seem to really apply at this time. So I’m looking at other options.

Can anyone explain to me how wholesalers are staying in business these days? I seem to be catching some flack for approaching an idea that I thought was legitimate. Many people are tying up properties (HUD, REO’s, Short Sales, etc.) with a proof of funds letter and an earnest money deposit–and then reselling them to an end buyer. Sometimes on the same day. My understanding is that no wholesaler intends to actually own the property long-term. They’re usually in the deal to sell to an end buyer, usually another investor who will buy and hold or fix and flip. So is wholesaling dead, or do people just not like the idea?

9

TrixyEnigma

As far as you Wholesale question. I think the answer is Yes there are still wholesaling, I dont think it will ever go away. It is going to very greatly depending on what state or area you are in. I do belive it has become more difficult for Wholesaling. I also think that the profit margin for wholesaling has gone done as well. I see a wholesaler as someone that wants to find good properties but does not want to take the added risk of doing the fix up and retail.

10

I have been a direct HML for the last 7 years. In my opinion it is no longer realistic to base the loan solely on the value and equity on the property UNLESS you as the HML want the property back. There are WAY too many questions now that need to be answered before I can make a loan as I do NOT want to take the property back AT ALL.

1.) Can the borrower afford the loan? (This requires the Lender to review the last 2 months bank statements and paystubs. If the borrower cannot afford the payments each month why would I want to make him a loan?)
2.) Can borrower afford the points, closing costs and any down payment if required? (See above)
3.) If the property does not sell by the maturity date of the loan can he refi the property with a conventional lender? (I don’t want an open-ended loan My loan terms are 6 months. If it is not sold by then it needs to be refi’ed. That means to ensure they can refi it I needs to confirm they would qualify. That means I need to pull their credit.

Again if the HML does not care if he takes the property back or not then he may not care about the borrower’s ability to make the monthly payments or be able to refinance the loan at the end of the term if it has not sold. I and most other DIRECT HMLs who have our own money on the line don’t want to have to foreclose and the deal with trying to sell a REO in this market. Most of us took properties back 3,5 - 4 years ago… we don’t want to do that again.