Rental Property Investor · Chicago, IL · Member since 2019 · 20 posts · 7 votes
Hello everyone, I'm a new investor in the Chicagoland area looking to invest capital and get my first rental property. Traditional banks and even some credit unions have so many guidelines for giving you a mortgage that's for a rental property.. especially if it's distressed( ughhh lol) , so I'm looking into hard money lending as an option. Could anyone with experience dealing with hard money tell me how the requirement process typically goes for an inexperienced investor? I would like to utilize the BRRR (Buy, Rehab, Rent, Repeat) method to obtain my first property.....or potentially a fix and flip if things don't go according to plan.
Do hard money lenders look at your FICO 8 score or the traditional bank or credit union widely used FICO 5,4,2 when judging your credit worthiness?
Do you actually pay a monthly payment on your hard money loan during the entire process until you payback the lender?
Is it hard to refinance out of a hard money loan with traditional banks and credit unions? What are their typical requirements in situations like this?
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
Hard money lender will typically take into account your credit score but it's more pass/fail/pass w/ contingencies. Many have minimum credit score requirements then a threshold where you may have to have reserves etc. You pay interest only monthly for the term of the loan or until you pay it off.
As far as refinancing goes that's a whole separate process. You'll want to see what you qualify for ahead of time so you don't get stuck with a hard money loan you can't get out of unless you sell if your plan is to buy and hold.
Rental Property Investor · Chicago, IL · Member since 2019 · 20 posts · 7 votes
6y
@Odie Ayaga
I really appreciate that info my friend. That’s the part I’m really worried about, being stuck in a hard money loan that I can’t get out off. I need to find a way to make sure I’m qualified for a regular 30 yr fixed mortgage to feel better about it. How would you suggest I do that?
Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
6y
Talk to your potential refi lenders first and explain what you're trying to do. With HML you're probably fine national, but for a refi lender you may want to work with someone who is more local and you have referrals from to know that they follow through on what they say they'll do