Do Hard Money Lenders Check Credit?
Not sure if your credit will get you a real estate loan? A hard money loan might fit you better.
Traditionally, property loans check your credit to see if your income qualifies you to repay the loan. However, hard money loans work differently. Instead of looking at your cash flow to support the loan, it uses a property as collateral. So, don’t stress out if your credit is less than stellar. The lender examines your deal’s quality instead of a financial score.
In this article, we give you a snapshot of how hard money lenders use your credit score.
Hard Money Loans Are Secured and Backed By Assets Like Real Property
Suppose you took out a secured credit card. You’d pay a cash sum to open the account that the lender keeps if you fail to pay the card balance.
Similarly, hard money loans are secured not by cash but by real property. Typically, you would use an investment property rather than your personal property. If you fail to pay back the loan, the lender can foreclose the property and liquidate it. Hard money loans are less risky for the lender because there is a tangible asset they can claim. Consequently, they are less focused on your income and more focused on the value of the project.
However, investors should be entirely committed to the project. Otherwise, they risk losing considerable money.
Can a Hard Money Lender Check My Credit?
Although lenders may not base the loan terms solely on your credit history, they still have the right to review it.
Even if they are not interested in your income and ability to repay the loan, lenders can glean other information from a credit check.
If you have a spotted history like past bankruptcies, foreclosures, and tax liens, the lender may give you pause. It suggests you may be a greater lending risk than someone with a higher score and no past tax problems.
If the lender checks your credit and finds no red flags, they will feel more confident that you are not a high-risk investment. Lenders that take too many risks on hard money loans hurt their ability to borrow money.
Be wary of a lender who does not check your credit. It could be a sign that the company has financial problems and may not be trustworthy.
The last thing you need is your lender going into bankruptcy!
Can I Get a Hard Money Loan with Credit Blemishes?
Rocky credit history does not necessarily count you out of the hard money loan enterprise.
Be honest and explain what happened. You might be surprised and heard money lender chooses to work with you anyway.
However, the lender may request you to resolve tax liens. Similarly, if you recently had a bankruptcy or foreclosure, they may ask you to wait until more time has passed.
What Credit Score Is Needed for a Hard Money Loan?
For modest projects, hard money lenders look for a credit score of 600 or higher. The investment is lower because the property is usually fixed and flipped in a short period.
However, suppose your project involves significant refurbishment and later rented out. In that case, the hard money lender might want a higher credit score. Essentially, they want to make sure you can later refinance the loan with a bank, which requires stronger creditworthiness.
Do I Pay More If My Credit Is Lower?
The beauty of hard money lenders is that you don’t have to have a perfect credit score. They are more willing to do buisness with you if you have lucrative property backing the loan.
However, hard money lenders may charge you higher rates if they perceive you as a riskier investment. Lenders may also ask for a larger down payment and a written statement about your credit history.
As you build a history of regular payments, your hard money loan opportunities improve.
Loans are made or arranged by Wilshire Quinn Income Fund, LLC (the “Fund”) pursuant to California Finance Lenders Law license #603J060. The information contained above is for informational purposes only and is meant to provide general background information on the Fund and its manager, Wilshire Quinn Capital, Inc. Any and all information is deemed reliable but is not guaranteed.
- Funding typically in 5-7 business days
Loan Amounts from $200,000 to $20,000,000
- Interest Rates from 8% to 10.5%
Loan Term: 3 – 24 months
Commercial & Residential (non-owner occupied) Real Estate
- Purchase, Refinance, Cash-out Refinance, Rehab, Blanket Loans
Foreign National Loans Available
About Wilshire Quinn
Wilshire Quinn is a San Diego hard money lender focused on short term bridge loans, secured by first trust deeds. The company is based in San Diego, CA with offices in Los Angeles and San Francisco. Wilshire Quinn typically funds loans for their customers in 5-7 days. Their successful track record is closely linked to their ability to make immediate lending decisions based on their highly disciplined underwriting approach. The company funds a variety of loans such as: refinance, purchase, blanket, rehab loans, 1031 exchange, partnership buyouts, and more. They originate hard money loans ranging from $200,000 – $20,000,000. Wilshire Quinn works with commercial and residential buyers nationwide.
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