The reason many investors use a private hard money lender is because they fund the project quicker and the criteria is less of a hassle then that of a bank.

When you purchase a loan with a bank, they require you to disclose proof of the following:

•    bank statements showing the down payment
•    paystubs
•    W’2s
•    Credit score of 620 and above

They also take from what used to be 30 to 45 days to look over the entire file of the applicant and give you an approval for closing.

Nowadays they take from 45 to 90 days to give you an approval for closing and that is no exaggeration.
However, a private hard money lender only requires the following:

•    A good property that can be sold for 35% more than the loan amount after repairs

That is it!

They do not run a credit check or ask for any financials. They base their approval on the project, not the person.
It is very wise that you already know the real estate game before getting any money from this type of lender because you need to know how much the house can sell for after repairs and how much repairs need to be done on the home.

This is because it would not make any sense to take money from a lender if it does not cover the repair cost.
What I mean by this is if a home is worth $100,000 after repairs and the private hard money lender is only going to give you $65,000. Then that $65,000 has to cover the price of the home as well as all repairs.

If it doesn’t, then you really have no deal.

Always make sure the loan amount can cover all costs.

Just a little note:  You should also try to include your three month mortgage payments into the borrowed amount as well.

Using a hard money lender gives you more lead way with purchasing a distressed property, foreclosure or pre-foreclosure.  This is because they already know your intentions as most of these lenders (also known as private money lenders) are often investors themselves.

With hard money lenders the criteria is not as difficult as with a regular mortgage lender. This is because each loan is structured a little differently.

Mortgage Lender:

• Property is usually owner occupied or renter occupied
• Property has to be habitable before closing
• Will loan from 97% to 80% of the purchase amount depending on the loan
• They don’t allow borrower to take more money than asking price unless it is to cover closing and very minor repairs (repairs usually no more than $5000)

Hard Money Lender:

• Property is usually vacant
• Property is assumed to be distressed
• Will loan 65% to 75% of the estimated value of home after repairs
• Can borrow enough money for repairs and even loan payments as long as it fits within above range

They also aren’t as strict when it comes to credit. However, you should have good credit and do deals with the best interest of the lender and yourself because after all, you are both in it to make money. Post

It is also wise to check around before settling for the first hard money lender you come across. This is because not all of them offer the same rates and it would be better for you to find the one with the lowest. The rates can range from 9% to 16% depending on your credit. This is also true for regular mortgage lenders, but their rates are much lower because they are backed by government programs and therefore they go by the financial APR (annual percentage rate). Their rates can be as low as 4.5% to 10%, depending on your credit scores.