So what does it take to qualify for a hard money loan? There are a few things that hard money lenders look for – and nothing is more important than the ARV.
Hard money loans are different than a traditional bank loan. To qualify for a hard money loan, lenders really look at the property more than they look at you as the borrower. This is opposite for a bank. Where a bank wants tons of info on tax returns and W-2’s, hard money lenders really want to see what is going on with the house. This is because with hard money, the house becomes the main instrument of securing the loan. And this is where ARV comes in. The ARV, or “after renovation value,” is the primary factor that determines risk for the lender. The higher you can get the spread between the loan amount and the ARV the better.
So for example, lets say you are buying a house for $95,000 and the ARV is $200,000 – then Wow! You’ve possibly got a winner. After that there are always the consideration of the cost of repairs, but notice how big the margin is. If it is a $95k loan – then the LTV (loan to value) is at 47.5%. That is well within the threshold for hard money lenders. Most hard money lenders will want to be under 70-75% of LTV. This number is really the first and most important component on qualifying for a hard money loan.
There are quite a few other things that hard money lenders will look at and these are things to be mindful of. But just know, that the deal is the biggest part of the whole thing. Here are a few other things a hard money lender might look at:
- experience in real estate
- credit score
- cash on hand
Again, remember that the strength of the deal is what can really pull you through and get you to the finish line and qualify you for a hard money loan. Even if you don’t have a lot of experience. Even if you don’t have good credit. And yes, even if you don’t have a lot of cash on hand. The stronger the deal the better. And the stronger the deal the more likely you are to succeed and profit – and ultimately that’s what the hard money guys are there to help you do. We lend so that you can do the deal.
Contact us or apply online for free and see how we can help you get into your next deal.
Flip House Funding Texas.