Hard Money Lending & Credit Scores

[Brandon Mix]

My girlfriend and I are about to form an LLC together for our flipping business. And although I have done several deals and rehabs pre-2008 (so it's been a while. lol), my credit is not that great right now. However, my girlfriends credit is phenomenal.

I have never had to use a hard money lender in the past, but we will be using them coming up very soon. My question to all those that are familiar with hard money lending requirements is, will we have a problem securing hard money loans (assuming the deal is a great deal) for our rehabs given that my credit is not great and that I am a partner in the LLC? Or should I not be an owner in the LLC?

We spoke to one hard money lender a couple months ago and he said that I should not add myself as an owner in the LLC because of my credit. Again, my girlfriend (the other partner in the LLC) has phenomenal credit.

And if you know of any hard money lenders that will work with our situation, please let me know their contact info.

Lastly, I do want to say that we have cash to put into our deals. So if there is a gap in our financing, we can cover this along with any contingencies that usually arise during rehabs. 

Any guidance in this area will be greatly appreciated. Thanks in advance!

Brandon & Tonya

[Casity Kao]

@Brandon Mix Hard money loans give greatest consideration to the asset and the experience you have to develop the asset. If your credit is not great it may influence a little but they care mostly about your ability to flip, skin in the game, and the margin you have to make a profit and pay them back. I would personally suggest using a broker to facilitate your first hard money loan but find out how they are paid. Do they charge over and above for does the HML pay them. For example lendinghome and a lot of the major hard money lenders in the country will take discounted points if you use a broker to facilitate the loan but you will still end up paying more, because you want to make sure it goes through smoothly if you are on a tight time frame. If you are not on a tight time frame to close then I would not use a broker but considering most of time hard money loans are involved with cash offers I am making the assumption you probably have 2-3 weeks to close. To give you a specific example of hard money lender we used, lendinghome would have charged 3 points on the same deal, but because a broker we paid 4 points total, in which 1.5 went to broker and 2.5 went to lendinghome. Once you have done a deal with any of the HMLs your profile is loaded into their system and the underwriting process is cut by 5 days so you should be able to facilitate the deal yourself and you will also know the flow of what they will request. Another thing to consider is whether you want to use a HML in your time zone. If you working with a HML on the east cost that could make it easier because if they request information you need you could done before you go to work if you have a W2 job. If you are available at all times I would definitely go with an HML in your time zone as it also makes it easier working with the title company where everybody in on same business hours.