100% Hard Money Financing?
Ok, let’s talk about 100% financing. Many people have become accustomed to 100% LTV loans (and higher) over the past few years. Unfortunately, many banks and lenders have been very irresponsible in how they lend money and we are starting to see the ill effects of these policies today. Banks are beginning to close up shop, lenders and investors who have purchased loan packages on the secondary market are going after lenders and mortgage brokers, and even Congress is holding hearings. What many people do not understand is that hard money lenders typically are MORE conservative when underwriting a loan. Why is this? Simple, private money lenders need to make sure that the collateral is good and that in the even they have to take a property back, they are secure and can sell the property in a timely manner. Most banks use a property valuation that estimates a 6 month to 1 year market time for selling a property, a private equity lender has to sell the property in 90 days or less typically.
How does all of this relate to 100% financing? Simple, 100% financing does not exist (to the best of our knowledge) in the hard money / private money world…at least not unless your parents are willing to loan you all of the money. While we do not know of anyone who will provide 100% hard money / private money financing here are a couple of very important items when you are out there looking for any kind of hard money purchase loan:
- You need some “Skin in the Game” - You need to have a significant amount of cash going into the deal if this is a purchase transaction. Why? Simple, we need to know that you are not going to just walk away from the deal provided it really isn’t the deal of the century or you get in over your head. This is the most important item people looking for a purchase loan or ARV purchase loan.
- Read #1 Again
This is not meant as a joke. This is something that 80% of the people that call us every day are looking for and can’t seem to wrap their heads around. Lenders need to see that borrowers are willing to back up claims that they have the deal of the century. The best way to do this is to show them that you/the borrower believes it is the deal of the centry by putting their own dollars into the deal as well. IF you are willing to do this put a good information package together on the deal, how much money you are looking for, how the funds will be used, and some information on the exit strategy. This will set you apart from the crowd and get the lender’s attention quickly.
tags: 100% financing, 100% ltv loans, hard money loans