Hard Money Bankers - Credit and Hard Money

This is a topic that needs to be addressed as many people call and ask about how their credit relates to them being able to do deals. My answer normally is , 'I have done loans with people from a 500 - 800 score'. When dealing with an asset based lender, the property itself should represent 90% of the underwriting. The credit and a few other factors certainly are to be taken into account, but far differently than a bank would look at them. A bank will flat out deny a borrower with 'not so great' credit regardless of the quality of deal or prior experience of the client. A good local hard money lender will be able to get creative and find a way to make it work.

If a borrower with 'not so great' credit calls and has a good deal, I usually ask a few questions first. I try to determine if they possibly could have someone with stronger credit to cosign in an LLC to form a partnership. The reason I do this is so I can confidently give the borrower the max loan I am comfortable with. When a borrower has 'not great' credit and can't find someone to cosign, I can usually still find a number that works, but it just won't be as aggressive. I have to offset the risk of the amount of money we are lending with the amount of cash to close that the client will bring to the table. Cash is another easy way to offset risk and many times someone with 'not great' credit will have the cash available.

There is a specific scenario that I bump into a lot today because of experienced borrowers that were hammered by the 2008 crash. Many times I receive a call from a very experienced investor that was clobbered by the 2008 crash and their credit is still recovering. A very experienced investor can find themselves back in the game with our money because we value their prior experience when underwriting. It does not mean you have to be an experienced investor, it just means it helps us consider some of your strengths when evaluating a deal.

All in all, if you truly have a good deal, a good hard money lender should be able to find a way to make the project work regardless of experience or credit. As my partner says ' there is always a number that works'. Having a relationship with a local hard money lender is very important in this capacity as you won't be able to get by the underwriting of national lenders in the same way you can structure a deal with a local lender.