As a real estate investor, having lower-than-average creditworthiness limits your financing options. Most banks won’t even talk to you if your score is below 650. If your score is less than perfect, your options are limited but not hopeless. A hard money loan (bad credit options) allows you to get the funding you need without the hassle.
Although there are many financing options in the world of real estate, most of them expect you to have good creditworthiness. Thankfully, this is not the case with hard loans for bad credit.
With this guide, you will learn all the ins and outs of getting a loan with bad credit. If you are wondering, “can I get a hard money loan with bad credit,” the answer is yes.
Understanding a Hard Money Loan From Hard Money Lenders
What is a hard money loan(s) for bad credit? A hard money loan is a short-term loan used as a bridge to help fund a person’s immediate financial needs. This is why this loan type is often referred to as a bridge loan. If your score is lacking, you need to find a hard money lender for bad credit.
A hard money loan is secured by a property. Because the hard money lender is more interested in the viability and profitability of the deal, they focus less on the borrower’s creditworthiness. Some bad credit hard money lenders do not even run a credit check.
How Can You Get Approved for This Type of Loan?
Most hard money loans and hard money bridge loans are based on your assets and the value of the property you are purchasing. The hard money lenders (bad credit options) are more interested in the deal than your income or financial history.
While you may have to provide proof of creditworthiness, this does not mean you will be denied a loan if your score is poor. Most lenders focus on the loan-to-value ratio instead.
A hard money loan may often be capped at around 65%, though this amount may vary slightly among lenders. Because they are short-term loans, the timelines are usually no more than 24 months.
Private money lenders like us are more willing to look past poor credit history, bankruptcies, and even foreclosures for a hard money bridge loan, as long as there is ample equity in the property and you can repay the loan in time.
As you likely know, banks conduct thorough financial checks during the approval process for a traditional loan. Traditional loans may not be approved or funded for 30-45 days or even more. Because hard money lenders perform less rigorous financial checks, the process for approval on these types of real estate loans is much shorter. A hard money loan can often be funded in ten days or sometimes less.
Due to lenders looking past low credit scores and other financial woes, the risks are higher. Because of these risks, the repayment times are much lower, and the interest rates are typically higher than traditional loans.
EXAMPLE LOAN SCENARIOS
Are There Hard Money Loans for Bad Credit?
As a real estate investor, having lower-than-average creditworthiness limits your financing options. Most banks won’t even talk to you if your score is below 650. If your score is less than perfect, your options are limited but not hopeless. A hard money loan (bad credit options) allows you to get the funding you need without the hassle.
Although there are many financing options in the world of real estate, most of them expect you to have good creditworthiness. Thankfully, this is not the case with hard loans for bad credit.
With this guide, you will learn all the ins and outs of getting a loan with bad credit. If you are wondering, “can I get a hard money loan with bad credit,” the answer is yes.
Understanding a Hard Money Loan From Hard Money Lenders
What is a hard money loan(s) for bad credit? A hard money loan is a short-term loan used as a bridge to help fund a person’s immediate financial needs. This is why this loan type is often referred to as a bridge loan. If your score is lacking, you need to find a hard money lender for bad credit.
A hard money loan is secured by a property. Because the hard money lender is more interested in the viability and profitability of the deal, they focus less on the borrower’s creditworthiness. Some bad credit hard money lenders do not even run a credit check.
How Can You Get Approved for This Type of Loan?
Most hard money loans and hard money bridge loans are based on your assets and the value of the property you are purchasing. The hard money lenders (bad credit options) are more interested in the deal than your income or financial history.
While you may have to provide proof of creditworthiness, this does not mean you will be denied a loan if your score is poor. Most lenders focus on the loan-to-value ratio instead.
A hard money loan may often be capped at around 65%, though this amount may vary slightly among lenders. Because they are short-term loans, the timelines are usually no more than 24 months.
Private money lenders like us are more willing to look past poor credit history, bankruptcies, and even foreclosures for a hard money bridge loan, as long as there is ample equity in the property and you can repay the loan in time.
As you likely know, banks conduct thorough financial checks during the approval process for a traditional loan. Traditional loans may not be approved or funded for 30-45 days or even more. Because hard money lenders perform less rigorous financial checks, the process for approval on these types of real estate loans is much shorter. A hard money loan can often be funded in ten days or sometimes less.
Due to lenders looking past low credit scores and other financial woes, the risks are higher. Because of these risks, the repayment times are much lower, and the interest rates are typically higher than traditional loans.
When Should You Seek a Hard Money Loan?
A hard money loan is much more lenient in its requirements than traditional mortgage lenders. If you are a real estate investor, the following reasons may prompt you to seek a loan with bad credit flexibility.
- You have a poor credit score.
- You need fast funding.
- The property does not qualify for traditional funding.
- You need to fund a fix-and-flip.
- You own multiple properties and need a loan.
- Your existing loan does not cover your financial needs.
Is It Possible to Fix Your Score With This Type of Loan?
If you need hard money (bad credit score) options, it is possible to rebuild your score. As we mentioned, a hard money loan does not have a requirement for minimum credit scores.
Do you have an investment property or commercial property with more than 50% equity? You could use a hard money bridge loan, take the cash out of your property, and use the cash to pay off debts and clean up your report.
Once your score has risen to 650 or above, you can go back to a traditional lender and get the long-term financing you need. Lenders will give you better terms, interest rates, and an increased approval percentage because you have a better score.
How to Get Pre-Qualified
The hard money approval process could not be easier. You can fill out a short pre-approval form on the website. You can also reach out, and we will help you with any questions.
How Can You Apply?
If you need private money loans for real estate or a hard money bridge loan, the process is not difficult. The following steps are involved in the application process.
- Complete an online application.
- Lenders may check your creditworthiness.
- If required, the lender will open the escrow and order an appraisal.
- The lender will review the appraisal and loan value.
- The lender will review the title report.
- Items will be cleared on the title report if necessary.
- The loan will be submitted to the underwriting process for approval.
- The hard money loan documents are prepared and sent to escrow.
- The escrow company will sign the loan documents.
- The lender wires the funds to escrow.
- Documents are recorded at the recorder’s office.
- The hard money loan approval is issued.
Most real estate investors need funding as fast as possible. Waiting around too long for bank funding means you lose out on some of the best properties. With investment loans (bad credit), you could get your money in less than ten days.
Will You Need an Appraisal and Down Payment?
Most loans will require an appraisal to determine the loan-to-value ratio, including those for a hard money bridge loan. If you have already had an appraisal done on the property, providing a copy to your lender could help speed up the approval process. Most hard money lenders are flexible on their down payment requirements, and this decision may be based on the loan-to-value (ltv) ratio.
How to Choose the Best Hard Money Lender
Once you’ve decided this loan is right for you, finding the best lender becomes an essential next step. How can you know you have chosen the right lender?
The right lender should have a solid track record and a good reputation. One of the biggest mistakes people interested in real estate loans make is choosing a lender and not a broker. A broker can generally offer you many more options with more flexibility.
Choose a private money lender that will form a mutually beneficial relationship with you. The best lender will be there for you every step of the way. Private investors will help you with your investment loans for bad credit.
MORE EXAMPLE LOAN SCENARIOS
Can You Get a Hard Money Loan When You Are New to Real Estate?
While some lenders will look for an experienced real estate investor, that does not mean you can’t get approval if you are new or have a poor credit score. If you have promising investment properties lined up, you can likely get approved for the project.
Hard Money Loans Are Ideal for Short-Term Development
Whether you are new to the industry or a successful real estate investor, the benefits of this type of loan are the same.
When you are working on short-term development projects, deciding whether this type of loan is right for your needs is based on the investments and not the amount of experience you have in investing.
You do not have to be stressed about the process of seeking this kind of loan as you would with a traditional bank loan. The steps could not be simpler.
Do not let your less-than-perfect score keep you from seeking funding for that amazing property deal. Now is the perfect time for you to learn about your financing options to decide which one is right for you.
Get Started Now for Fast Pre-Approval
We understand the need for fast funding. You do not have time to wait around for a traditional bank loan to decide if you meet their borrower credit score requirements.
Get started right away, and we will be happy to help you with any questions you may have. With a lightning-fast process, you can receive approval quickly.
Bad credit hard money loans may be just what you need to snatch up the best property deals. Don’t let a low credit score stop you from applying. We are here to help!