Posted by Nate on March 05, 2001 at 22:11:25:
I think it is becoming more common for hard money lenders to at least look at the credit of the principals involved. It may not be a part of the underwriting decision, but if the person(s) have a proven track record of taking others’ money and not returning it, even a hard money lender might question whether or not to get involved. A hard money lender, like any other lender, doesn’t really want the property. They want their money back, with interest. If you are a deadbeat, and you get a hard money loan at a low LTV, the lender is protected pretty well by the equity in the property. But if you are not a deadbeat, and borrow at the same low LTV, the lender is arguably protected better. Make sense?
I have been a hard money lender in the past – with my own personal funds – and made one TERRIBLE mistake when I did not look at the borrower’s credit history in enough detail. Although I eventually got my money back, I lost much of the hoped-for gain and it was returned only after 18 months of working through the legal system. So I cannot blame anyone who lends money to anyone else under pretty much any conditions wanting to check the credit of the borrower.
I don’t think that merely looking at credit means a lender is not a “hard money lender”. I think a lot of the common tactics of “conventional” lenders, such as changing the interest rate based upon credit, would not be considered hard money lending.
Beyond that, each lender will have their own policies as to fees, points, and the like. If you are expecting someone to put up all the money, including closing costs, so that you get into the deal with not one red cent out of your own pocket, good luck looking! If you find one like that, post it here!