What do hard money lenders look for when approving loans?

Written by Norfolk Capital

December 22, 2020

hard money loans for contractors | Norfolk Capital
Hard money lenders have the flexibility to establish their own requirements for a loan approval. Banks are under FHA guidelines, and their loans are written through Fannie Mae and Freddy Mac. Therefore, they are often not able to provide loans for fix & flippers entrepreneurs, residential developers, and/or contractors looking to make quick renovations

Hard Money Criteria #1: Focused on the plan

Hard money focuses on whether the business deal the loan is based on is profitable, achievable, and has a clear exit date before its maturity date. Hard money lenders are more interested in the property and the plan than they are the borrower’s record, so it can be a great option for borrowers with less-than-ideal credit scores and loss histories. To rate your plan, your lender will look at the value of properties in the area and their growth projections. After receiving an estimate of the ARV (after repair value) of your property, most lenders will agree upon a percentage of that value, which can usually vary around sixty to seventy percent.

Hard Money Criteria #2: Cash up front or Refinancing

Hard money lenders tend to lend to developers who are looking to rehab a residential property to sell later. They are looking for borrowers who already have enough cash to be able to pay for a thirty to forty percent down payment as well as for the higher interest’s hard money has compared to conventional borrowing. They are also looking for people who intend to use this option as a bridge loan until they can receive a more traditional loan but can’t wait until the mortgage can be approved.

Get Your Project Started

Real estate developers and home rehabbers look to hard money because sometimes the only way to achieve the deal of a lifetime is to act now. When you are ready to get your project into its construction phase a hard money loan will get you your money right away, pending just a fair assessment of the business deal. Norfolk Capital is Boston’s leading hard money lender for your real estate development needs.

apply for a hard money loan | Norfolk Capital

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