PreQualify for a Hard Money Loan??

Financing, Hard Money Lenders, Private Money
1

My husband and I are still trying to figure out our first purchase. We are trying to be very smart about it. Can any of you help me with the process of a hard money loan?

Do we have to know what house we want to buy?

Can we get prequalified?

Thank you in advance for your help! I am thrilled to start this new adventure but I also want to be educated on the process!

2

Here are some pointers for you—before applying for a hard money loan pre-approval, try to:

  • Assemble some cash reserves—the majority of lenders you will speak to will escrow the cost of repairs and remiburse you (this is called a draw) after they have inspected and verified the work has been done.
  • Make sure your credit is good order—you will need a FICO of 620 or better to qualify for the better hard money programs.
  • If you are new at this, get yourself a good set of “eyes and ears”—assemble a good team to help you to determine as is values, future market value and cost of repairs. People like appraisers, contractors, etc. are necessary components of every successful rehab business.
  • Know your exit before you enter—have a clear understanding/plan on how you intend to exit the investment (will you rent or will you sell after rehab).

In response to your questions (please understand that each investor has their own recipe as it relates to credit score/cash reserve requirements, experience, max. ARV allowance, etc):

a. You don’t have to have an investment picked out in order to get qualified for all hard money loans—all FULL DOC programs allow for prequalification (also known as POF or proof of funds) without the need to ID a property. STATED and NO DOC lenders need to know about the property before issuing a POF (because they are basing the loan decision in large part or exclusively on the property).
b. Getting prequalified in most cases is not too dissimilar to what one needs to do in a conventional setting (with the exception that fewer documents are often required for hard money lenders)—most lenders offer a 2-3 day POF service after the investor has submitted the required documentation for initial underwriting review.

Hope this helps.

Regards,

Scott Miller