Hard Money Loans For Bad Credit

This guide will cover using hard money loans for bad credit borrowers to purchase real estate properties. Many folks have heard of hard money loans for bad credit.  Hard money loans for bad credit are loans made by hard money lenders who are private investors. One frequently asked question at Gustan Cho Associates is how hard it is to get approved for hard money loans for bad credit fast.

How Difficult Is It To Get Hard Money Loans For Bad Credit?

Hard money loans for bad credit can be processed and underwritten fast. Hard money loans for bad credit are for investment homes only. Due to the heavy regulations, you cannot use hard money loans for bad credit on owner-occupant primary homes. This blog will cover and discuss hard money loans for bad credit.

What Is The Easiest Hard Money Loans For Bad Credit?

The team at Gustan Cho Associates has a network of over 190 wholesale lending partners, including non-QM and non-prime wholesale investors. We can help our borrowers who need hard money loans for bad credit. The team at Gustan Cho Associates are experts in helping borrowers with government and conventional loans, non-QM and alternative mortgage loans, non-prime loans, investment property mortgage loans, bridge loans, hard money loans for bad credit, and commercial loans.

Is It Possible To Get Hard Money Loans With Bad Credit?

Again, a frequently asked question we get at Gustan Cho Associates is what is the easiest type of hard money loans to get with bad credit.

Hard money loans are normally based more on the collateral than a person’s credit scores, income, credit history, and financial profile.  Hard money loans are extremely expensive and require upfront fees as well.  Hard money lenders often charge an upfront fee of 3% to 10% and interest rates of more than 12%.

Terms Of Hard Money Loans For Bad Credit

There are thousands of hard money lenders and each hard money lender has its own hard money lending criteria and requirements.  Unlike traditional commercial and residential mortgage lenders, hard money lenders set up their own lending criteria.  Hard money lenders are normally concerned more about the asset or collateral than the person’s credit scores and income, unlike traditional commercial lenders.

Mortgage Brokers of Hard Money Loans For Bad Credit

Most hard money lenders will only lend between 50% to 70% loan to value. Depending on the hard money lender, the terms of the interest payments can be due monthly, or an interest reserve may be set up.  Hard money lenders normally want a minimum term of 6 months and not more than a 36-month loan term.

Even though the hardest money lenders are mainly concerned about the collateral, they are also concerned with the guarantor’s credit and income.  Hard money lenders do not want to see outstanding judgments on the borrower because the judgment may be enforced and a lien be placed on the collateral.

Benefits of Hard Money Loans For Bad Credit Has Its Benefits

Hard money loans are extremely expensive but offer benefits for the right borrower.  Real estate investors can use hard money loans in an appreciating real estate market.  Let’s take a case scenario where a hard money loan benefits a real estate investor.

How Can You Buy Investment Property With Hard Money Loan

Let’s assume a real estate investor wants to purchase a property for $100,000 from a sheriff’s sale that is coming up shortly.  He contacts a hard money lender and the hard money lender will approve a 65% loan to value loan to the real estate investor but wants a 6% upfront origination fee and 15% interest with a minimum loan term of 6 months.  The real estate investor knows that if he purchases this property from the sheriff’s sale and invests $20,000, he can resell the property for $200,000 in less than six months.  The real estate investor decides to go for the deal.

Here are the numbers:

• Real estate investor needs to pay the hard money lender 6% of the $65,000 loan amount, which is $3,900.
• A real estate investor invests $35,000 of his own money.

How Do Hard Money Loans For Bad Credit Work

A real estate investor invests $20,000 for labor and material to rehab the subject property, which takes him two months to rehab the property.  The real estate investor then places the property on the market for $200,000  and lands a purchase contract at the asking price of $200,000 within several weeks of listing the property, and it takes him four months to close on the property.

• Real estate investors need to pay six months of interest of $65,000 at 15%, which costs them $4,875.
• Real estate investors must pay a sales commission of 6% or $12,000.

Case Scenario of Using Hard Money Loans To Buy Investment Property

Here is the summary of this case scenario.

• Original investment from a real estate investor
• $35,000 down payment.
• $3,900 upfront fee of 6% to the hard money lender.
• $4,875 interest payment to hard money lender:  15% annual interest rate, interest-only payment for a loan amount of $65,000.
• $20,000 rehab cost for labor and materials.
• $12,000 real estate sales commission to real estate agents.
• $5,000 in closing costs.

The total investment from real estate investors is $80,775. Property sold for $200,000 so net profit is $200,000 minus $80,775 which yields $119,225.

How Can I Qualify For Hard Money Loans For Bad Credit

The above example is a simple case scenario where the transaction was extremely profitable to the real estate investor. Not all transactions go smoothly, and it is a win-win situation.  Getting a hard money loan is extremely risky for real estate investors who can lose their entire investment.  Hard money loans are not regulated by mortgage regulators like residential mortgage loans are.

How Fast Can I Get Hard Money Loans For Bad Credit?

Hard money loans for bad credit can close very fast. Hard money loans have no red tape since they are not strictly regulated like residential owner-occupant primary home loans.

You can close hard money loans for bad credit in a few weeks. Often time than not, hard money loans for bad credit can close in less than thirty days.

Hard money lenders are classified as commercial lenders.  Commercial lenders have not regulated by federal or state mortgage regulators, and commercial investors are viewed as sophisticated investors, so they do not have the protection of state and federal mortgage regulators.

Hard Money Loans For Bad Credit For Investors

Gustan Cho Associates works closely with our sister non-QM and alternative lending partner Non-QM Mortgage Brokers, Inc., private money capital group, and national hard money loans for bad credit mortgage brokers. Gustan Cho Associates’s private money capital group is a commercial mortgage broker who handles short-term bridge and private money loans and assists its investors with end financing.

Text us for a faster response. The team at Gustan Cho Associates are experts in originating and funding hard money loans for bad credit. The team at Gustan Cho Associates is available seven days a week, in the evenings, on weekends, and holidays.

Frequently Asked Questions About Hard Money Loans For Bad Credit

1. What is a bad credit hard money loan?

Hard money loans for bad credit usually have short durations. Real estate loans are based on the property’s value—not your credit score. They are a common choice for people who can’t qualify for traditional financing due to poor credit.

2. Can I get a hard money loan even if my credit score is under 500?

Yes. Hard money loans for bad credit often have no minimum credit score requirement. Approval is based on the property’s value and your down payment or equity.

3. Do I need income verification for a hard money loan?

Not usually. Most lenders offering hard money loans for bad credit don’t require income documents like pay stubs or tax returns. The focus is on the asset, not your personal finances.

4. What kind of properties can I finance with hard money loans for bad credit?

You can use hard money loans for bad credit to finance investment properties, fix-and-flips, rental homes, or even land. Some lenders may finance primary residences, but terms vary.

5. How much down payment is needed for hard money loans for bad credit?

Most lenders require 20% to 40% down, depending on the loan-to-value (LTV). The lower your credit, the more equity or cash you’ll need upfront.

6. Are interest rates high on hard money loans for bad credit?

Yes. Hard money loans for bad credit usually have higher rates than conventional loans, generally between 9% and 14%. This is because hard money loans carry more risk for the lender.

7. How fast can I get approved for a hard money loan with bad credit?

You can get approved in 24 to 48 hours and close in 5 to 14 days. Hard money lenders move quickly, especially when you have a solid deal and enough equity.

8. Can I refinance out of a hard money loan for bad credit?

Yes. Many borrowers use short-term hard money loans and then refinance into a traditional mortgage once their credit improves or the property is renovated.

9. What documents do I need for a hard money loan with bad credit?

You’ll typically need a purchase contract (or proof of ownership), property appraisal or valuation, and ID. Some lenders may ask for bank statements showing available funds.

10. Are hard money loans for bad credit a good idea?

They can be. Hard money loans for bad credit are outstanding for real estate investors or buyers in unique situations. Before committing, understand the short repayment terms, higher costs, and exit strategy.