Hard money loans are asset based loans. The amount of a hard money loan is based on the value of the assetâ€¦much like a pawn shop loan. The credit, income and general ability of the borrower to repay is of little importance because the hard money lender only lends enough to allow plenty of cushion in case the REAL source of repayment is a distress sale of the collateral. Hard money loans are considered to be high risk and carry a cost in up front points and/or interest rate that reflect the risk. They are also mostly short term in nature compared to a traditional mortgage.
Here are some terms that one hard money lender that I know advertises:
â€¢ Fast, easy closings.
â€¢ All loans are Interest Only with NO pre-pay.
â€¢ Terms - 6 months to 3 years.
â€¢ No minimum loan amount.
â€¢ No credit score limits.
â€¢ Bad Credit, short sales, foreclosures and bankruptcy - OK
â€¢ Property can be in various conditions of rehab and repairs needed - OK
â€¢ Trusts, LLCâ€™s, Corporations â€“ OK
â€¢ Non US Citizens are - OK
Here is another:
"call me when you need hard $$$. We go to 60% LTV with very attractive loan products that are interest only. We lend only in CA & also lend up to 50% LTV on raw land...
We are equity driven - therefore bad credit is ok, mtg lates, etc...We lend with a 350 fico score ..."
NOTE: both are California based lenders.