100% Hard Money Lending or Other Creative Funding Options??

Question

Since according to BP rules, I can't actually solicit for a lender, can someone at least tell me if they've had experience with this hard money lender - Do Hard Money (positive or negative)

(Note: I make a good salary and have good credit, but am pretty much maxed out for loans due to the purchase of my personal residence this Feb. which basically puts me at the max loan to income even though my boyfriend pays "rent"/half the mortgage, but he's not listed on the home so it looks like on paper I am paying for it solely).

So far, I've only found Do Hard Money, which DOES offer this type of funding, but they require $3000 down (which I'm not opposed to paying in it of itself - plus, they refund you $2350 of that when you pay back your first loan...if you ever get the first loan to begin with). However, I am apprehensive to sign the paperwork because I've been reading reviews, and it's been said they basically deny every deal you present to them for one reason or another (crime rate, length of time properties are listed in a given area, etc) and EVERY time you present them a deal, there is $650 non-refundable fee applied to each deal they "process/evaluate". I'm just worried I'll end up submitting a bunch of deals (if they don't accept the initial one I have planned) and never secure one they deem "appropriate" (and therefore forfeit the entire $3000 since I will never GET an actual loan to pay back so I can get reimbursed at the end of the term). So again, I don't mind paying a $3000 upfront fee IF I can be guaranteed I would actually get the loan for the property I have in mind. (Added note: I was already approved through them for their max loan amount of $250,000, but it's the properties themselves that have to be individually evaluated and approved). Hopefully someone here has worked with them and can let me know of their experience!

Any other advice appreciated! Thanks in advance!

Nghi Le · Answer

@Kat Malkowski

Welcome to BP and congrats on your first post!

I would never pay any money up front to qualify for a hard money lender.  Usually, that's a scam.  Only thing you should ever have to pay up front for is the appraisal/BPO.

Also, be careful about 100% financing lenders.  They do exist, but they're usually very expensive.  Everything's a trade-off with lenders, and they make sure they are always in the best position of protecting themselves.  So they'll give you something, but will take away something else.

You can never truly get 100% financing.  You'll have to pay points and fees at closing, along with other closing costs (escrow fees, title insurance, prepaid hazard insurance, prepaid interest, prorated taxes, etc).  And that's just cash to close.  All lenders also want to see that you have additional reserves in the bank, such as 6 months of interest payments and some funds to start the rehab yourself.  When you have a rehab loan, the amount they give you is actually given to you in draws as a reimbursement, which means you'll need to front the initial rehab costs yourself.

I always tell people that they should have at least 20% down payment, regardless of the terms the lenders give you.

Jay Hinrichs · Answer

@Jason Hirko  making 3k on your turndowns seems to be a pretty good gig.. :)  and its just simple math most that go with a no money down lender .. it means they don't have much cash up front.. and once u get a few turn downs they are done all their cash is gone.. plus tends to be the least experienced so they go through an expensive learning curve ... I have no doubt this company funds.. but I also think they are laughing all the way to the bank on all the money they make when newbies not knowning what they don't know think they have a deal but they really don't

I suspect to get funding from this company it has to BE a SCREAMING deal with a ton of equity.. if not this company would be taking huge risk..  beginning borrower Not enough equity..

And lets face it .. those deals are not just sitting on the branch's to be plucked.. in many markets deals are dog tough.

In my mind EsPecially as a beginner first thing you need to do is get the discipline to save cash for equity and or put a group together so that you are bringing in true equity.

if I borrow from a HML like lendinghome or Conventus  I need to put skin in the game.. I get the next rate up from my bank at 1 and 8..

Jason Hirko · Answer

@Kat Malkowski There are several threads on BP that deal with this exact question. The lender in question is even on the boards to defend themselves, for whatever that is worth.

With that said, the above points are valid. 100% financing does exist, however it is usually reserved for people who don't really need it. I bet @Jay Hinrichs gets 100% financing and it's not because he can't put together a down payment!

Ben Stoodley · Answer

Hey @Kat Malkowski - I think everything you absolutely need to know about HML was said clearly by @Nghi Le above. HMLs that you want to work with will NEVER charge upfront fees. Also, 100% financing is a very risky and likely scammy type of loan to offer, likely due to an inexperienced(at best)lender.

Always confirm amount of junk fees as well. Many lenders will say 2-3 points but then leave out the $1500-$3500 in junk fees that you pay as well. Prepayment penalty may be an important factor for you as well, depending on your exit strategy.

Personally, ask around in your local RE Investor community, and here on BP of course, for referrals to HMLs. There are good ones out there, we do exist! ;-)

Good luck!

Account Closed · Answer

Hi @Kat Malkowski-   I'm actually in the same boat you are in (but in Chicago).  After reading the comments on this post and others I think I will hold on using DHM at this time. although I did see a couple of Chicago people that did have their loans funded and DHM does show the title companies HUD.

If you do go through their process can you update this post on how it went?

Shawn Ackerman · Answer

@Kat Malkowski Be upfront with the lender and tell them that you would have no problem paying their fees on the back end at closing.  Obviously you would have to pay for appraisal/inspection(If HML requires either or both).  Application fees, not uncommon.  I asked my HM guy to put that application/processing fee on the back end and he said no problem.  The deal I had was amazing and his "money guy" was eager to do the deal.  My guy charged 2 points and the actual principal had a 2 point fee and 10% per month for 12 months.  Don't think those are terrible numbers.   I didn't end up closing the deal with my guy as I sold it to another investor but my experience tells me that if the HML is rigid when it comes to the up front fees then that's a red flag for me.  All the best to you.  Always remember to persist and you will WIN!!

Ham Merritt · Answer

@Kat Malkowski Portfolio lending could be a good option for you. Wholesalers can, from time to time have unique products tailored specifically for investors like you. Wholesale products are not accessible to borrowers direct. You have to find a lender that has direct access to wholesale products. Hope this helps.

Scott Krone · Answer

A local Chicago lender is Renovo.  On a national front Grand Coast Capital.  Both evaluate the deals first as opposed to traditional lenders.  They will charge more.

James Wise · Answer

Do Hard Money charges (at least they used to) people a monthly fee for fake pre approval letters....Because of that I thought for the longest time they just made all of their money in application fees & never actually lent anyone any money. However I did end up selling a couple listings last year & the buyer used them for financing. At 1st I advised my client of my skepticism of the buyers ability to close due to the fact he was using Do Hard Money. My client decided to give it a shot & to my surprise the buyer was able to obtain funding through them.

In short I suspect their business model involves a large portion of their income coming from application fees but if your deal really is that good they do have funds to lend.

100% Hard Money Lending or Other Creative Funding Options??

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