Can you get a hard money loan with bad credit?
You want to buy an investment property and you need to borrow money to buy it but you might have bad credit.
You’ve heard or read somewhere that hard money loans are the types of loans that real estate investors use to buy investment properties. But you worry that maybe you won’t be able to qualify for a loan to buy real estate because you’ve had some credit problems in your past.
The good news is that most private money lenders don’t consider your credit history when approving loans on investment properties.
Most lenders are looking at the real estate asset that will be used as collateral for the loan rather than looking at your credit score. This is why they are called hard money loans, because they are loans against “hard” assets like real estate.
However there are some hard money lenders that do consider your credit score in loan approval. As you seek out lenders that lend in your geographic areas and compare interest rates and fees, make sure to ask each of them how credit score influences their lending decisions.
If credit does weigh in as a factor for approval, the next question is, what is the minimum credit score requirement that they require? Some lenders will give a higher interest rate to borrowers with a low credit score, while other lenders may increase the down payment requirement of a borrower with a low credit score. Always ask the credit question upfront if you are unsure. You may also search in the lender’s website for specific requirements regarding credit.
So, can you get a hard money loan with bad credit to purchase an investment property? The answer is yes.
In fact, private money is one of the most popular means by which real estate investors with poor credit are able to purchase investment properties. While most hard money lenders don’t care about the credit scores of their borrowers, there are some lenders who do have credit score minimums or other credit-based criteria.
Do your homework on the specific requirements of each lender when comparing your loan options. If your credit score will affect your interest rate or will increase the amount of your down payment, you need to know!
By asking questions upfront about how credit score influences a lender’s lending decisions, you will avoid any surprises later down the road that may kill your real estate deal.
If you have more questions about this contact us or leave a comment below.