Why Are Hard Money Lenders Asking for Credit Reports?

[Corey Dutton]

This is what people ask me all the time: Is there any such thing as an asset based lender anymore? These days, most hard money lenders are asking for a credit report and other documentation from borrowers to give them a loan.

For example, a borrower buys a wholesale property and is looking for a hard money loan. Fair market value for the property is $450K and the borrower is buying it wholesale for $180K. If a hard money lender is only giving him 65% of the purchase price, why would the lender need to see the borrower’s credit report??!!

On a low LTV loan like this, this is truly an asset based, hard money loan. Why would credit be an issue? I think hard money lenders are just getting too picky and I wonder myself, ‘Is there any such thing as a true asset based lender anymore?'

Can anyone help answer this question?

[Brian Wall]

in addition to what everyone else is saying regarding tax liens, judgement liens, etc. There is one more reason.

A HML told me that since he is now licensed as a lenderd there are certain things he has to do to stay in compliance. One of those things is to have the applicant fill out a standard loan app, and the other is to obtain a credit report.

Brian