You’ve found the perfect house to buy and flip. You’ve done your due-diligence, made your offer and got the property at a great price as long as you pay “cash” and close quickly, but you don’t quite have enough money on hand—now what?
Hard money loans help flippers in this exact situation. They are meant to aid flippers who need to close quickly and not jump through the hoops of a traditional bank loan. So, how can you get a hard money loan? First, you’ll need to make sure your team and your project qualifies.
Who Can Qualify for Hard Money Loans?
Unlike traditional bank loans, the primary factor hard money lenders are looking at is the overall profitability of the deal the investor is considering. Banks place tremendous focus on both the property as collateral and the buyer’s creditworthiness because they are lending as much as 97% of the property’s value. If the buyer fails to make their mortgage payments, the bank stands to lose money due to the high Loan-to-Value or LTV.
While a hard money lenders in Maryland wants to understand who they are lending to by reviewing the flipper’s experience, cash-on-hand, income and credit, their focus is more on the property itself. They will carefully review the value of the property, the extent of rehab that is planned for the home, and who the contractor is doing the work. As a result, hard money lenders will de-emphasize the credit and income profile of the borrower as a qualification for the loan.
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