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Updated about 7 years ago on . Most recent reply

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13
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Jessie Creighton
  • Gorham, ME
2
Votes |
13
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I'm confused on how this hard money lender thing works?

Jessie Creighton
  • Gorham, ME
Posted
Hi all, I'm looking to find my first flip in windham Maine area, and found a great agent. I need to have financing lined up before making any offers I'm told, but it was my understanding that hard lenders need the deal info before I can apply. Isn't that a catch 22? Anyone have advice on a good hard money lender and how to get pre-approved before actually finding the deal? Or do you find the deal and scramble to get financing before you can make the offer? I have been pre-approved for a line of credit but that's just the supplementary financing for whatever isn't covered.

Most Popular Reply

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351
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Matt Shields
  • Broker
  • Phoenix, AZ
273
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351
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Matt Shields
  • Broker
  • Phoenix, AZ
Replied

Unlike traditional mortgage lenders, hard money lenders are like commercial lenders, they lend based on the property's value and the deals numbers, unlike a mortgage lender who looks at property value but is primarily lending to your income, credit, and history. Some hard money lenders do consider income/credit, but none has ever asked for mine.

Think of hard money like a pawnshop. You need short-term money now. The pawnshop doesn't care about who you are, just what the item is worth, and can they get their money out of it if you default.

So it is difficult for a hard money lender to give a blanket pre-approval letter without property, although after you have completed a few loans on time and earned their trust, I could see a hard money lender providing this. Remember that they are all different and range from large companies with thousands of loans to the guy on craigslist.

Before I purchase a property, I explain my general business model to the lender, make sure that it is something that they are interested in and they have the funds needed. I also keep a couple of lenders in the on-deck circle just in case the primary craps out. Once you find a deal a hard money lender should be able to react quickly getting you a pre-approval letter and funding. I have money within 24 hours. Good luck.

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