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What is 'Hard Money' ?

Mortgage and Lending with Chris Martin Jr. Hard Money

Seems hard money lenders are popping up like mushrooms.

Reminds me of the subprime boom 2001-2006, withhundreds of lenders competing to fund non-prime deals. Subprime has a bad name now, so 'hard money' seems to be the catch all phrase of the moment. It covers hard money, subrime and dirty alt-A.

Stepping back, hard money was, well, hard. The terms were simliar to credit cards- high rates, big fees. Really only suitable for bailouts and distressed situations. But is was easy to qualify, as lenders tended to be be highly regional, small operators, who were OK to 'loan to own'.

Hard money loans are business purpose loans, and cover all residential and commercial property types. Lenders specialize in different sub-categories, and also have limited geography and loan size parameters. Lenders include individual check writers, groups of check writers, pools and funds.

Borrowers shopping for a loan can get frustrated by dead ends, or misquotes, because they are searching the general market for financing in a specific sub-category. Like an 'A paper' borrower calling a sub-prime bank, they won't get a quote that makes sense.

These are the most popular 'hard money' sub-categories;

-owner occupied/user, usually alt-A underwriting; bank statements, asset depletion, hybrid model, with lower score minimum, and lower LTV

-fix and flip bridge loan, purchase/refinance plus rehab funds

-purchase/refinance in 'distressed situation'; challenges with property, borrower or transaction

-fast close/no docs, equity based bridge loan, easy to qualify, with no/low score minimum and low LTV

-buy and hold bridge loan; rates higher than a conventional lender, lower than hard money, 2 - 30 yrs.

Each sub-category is serviced by lenders who specialize in that segment. Each lender has different guidelines. Those differences, and pricing variances impact the structure of the deal. The structure impacts your bottom line.

Knowing what your shopping for, and what type of lender you should be speaking with will help you find the needle in a hay stack. Now you just need to get through the first round of the 'Yes!' game, compete a few applications, and fight through the valuation process-  and then you can get your pricing.

Contact me for a push in the right direction, Chris Martin Jr., Your Hard Money Broker since 1999. 858-999-6955 / CMJHardMoney@gmail.com



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