Hard money commercial mortgage loans are not meticulous with the borrower?s credit score. Instead, they approved loans based on the equity. Unlike the conventional loans, you can close hard money loans faster because they require lesser documentation. You can immediately receive the funds from hard money lenders if you meet their requirements.
1. Cash: Although some lenders do not require down payments, they will charge you with other fees. Funds used in hard and soft costs such as actual site work and engineering plans will be charged on the equity. Normally, private mortgage lenders aim to get 10% cash or hard equity from the borrowers.
2. Equity: Hard money lenders implement lower loan-to-value rations of the substantial equity. Usually, approved loans are not more than 50% of the raw land, 60% of the full entitled land or 65% of infrastructure properties. They do not exceed in 90% of the collateral?s value.
3. Credibility: Although they do not focus on credit reports, private lenders will check your credit history to determine your character and credibility.
4. Experience: Property owners and builders will have better chances of getting a loan compared to first time investors and developers.
With These Factors in Place, You Will be Approved
These are the main things private lenders are concerned with when they consider a hard money loan. If a borrower is of good character, has some experience (or has a partner with experience), and can show both hard (cash) and soft equity in a deal, chances are very good that they’ll easily qualify for a privately funded commercial mortgage loan.
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