Private Mortgage Lenders have become the leading lenders for commercial property loans as well as investment property loans since the real estate crash in 2008. A private mortgage lender is an individual or a company that is not a bank or lending institution, but rather a private party willing to make commercial property loans or investment property loans secured by real estate.
A hard money mortgage should be used for investment and commercial loans when you are actually looking to get your investment property loans and commercial property loans closed these days, this is your only option. There are so many investors that still think because they have good credit and 20% down, banks will be tripping over themselves to fund their investment property loans. That is not the case these days. The only reliable source to get your investment property and commercial property loans funded will be through a hard money lender.
Your probably asking yourself why with a 700 credit score banks aren’t lending. Well that’s simple. It didn’t really make a difference what your credit score was the past few years, if you weren’t going to pay, you weren’t going to pay. So the amount of your down payment will be a bigger factor than your credit. Banks cant decide still who to lend to and who not to lend to for investment and commercial properties, so they really have stepped back from doing this type of lending at all.
This type of funding is all based on risk. A private mortgage lender or private mortgage lenders will use the risk factor and what they feel is the probability that they will be repaid as a major factor in making a loan. By putting down the required down payment, the risk to the private mortgage lender or private mortgage lenders is shifted partially to the borrower as well. As we learned over the past several years from the housing market crash, no matter what your credit score, no matter what your income, if your not going to pay, your just not going to pay. BUT, if you have a substantial financial risk at hand (20-40% of the purchase price), then you will probably think 2x about about not making your payment.
When you actually have your own money, and a substantial part of the deal funded by you, there is a good shot that if your deal has your own funds in it, you will be less likely to walk away. I tell my borrowers to ask themselves the same question - who's deal would you fund -
Borrower A : looking for fix and flip money for 100% of his purchase price, and 100% of his rehab money and closing costs paid by the lender
Borrower B: looking for 60-80% of the purchase price covered by the lender, borrower B is paying for his own rehab and his own closing costs.
IF you had to fund one of these loans out of your own pocket, assuming the same interest rate, same term, same exit, same points, which would get your check? Now think about if you were the private mortgage lender or private mortgage lenders.
You should typically close in 7 days or less, and will look at very little, if at all income or credit documentation. The main concern is the location, property type and the borrowers exit strategy for the loan.
When it comes to commercial property loans, there are many factors to consider, pride of ownership, the type of business in the property, the ability to service the debt and what the funds will be used for. A private mortgage lender and private mortgage lenders want to know that their loan is secure not only by the property to make sure the borrower can service the debt, but also in case of default.
If the borrower does not have a valid exit strategy, many times the loan is not made. Hard money lenders want to make sure that the funds will be paid back to them in a reasonable time frame and that the borrower will not get discouraged and walk away from the property, and leave the lender with a half finished house and then they would have to finish it themselves to get the property on the market.
So if you are looking to fund your investment property loans, apply on the top right of this page and we will show you how important it is to know where to find your hard money loans and a hard money mortgage.