I recently spoke with a couple who were having trouble with paying their mortgage and were desperate to refinance their home. However, they were 5 months behind in their mortgage and received a notice of default but their lender had not yet foreclosed upon them. They did not want to leave their home of 9 years with their 3 kids because they felt it would be too disruptive to their family. I couldn’t agree with them more. However, something had to be done and quick to save their home.
So here are the facts that they had to face. Their credit was shot and had a high debt ratio so they couldn’t possibly obtain a conventional bank loan. A regular bank loan would be out of the question for any homeowner who has limited loan to value, low FICO scores, lack of income documentation, notice of default, bankruptcy and collection accounts.
Nevertheless there was still a possibility of seeking a hard money or private money loan with an investor who lends based upon assets. Fortunately for this family, their loan to value met the requirements of most hard money and private investors and were able to save their home.
If you are one of the many homeowners caught in the foreclosure crisis and want to save your home then consider the possibility of taking on a hard money or private money loan. I say this with caution because make sure that you have a strategic plan in place.
However, the reason why you may want to consider a hard money or private money loan is simple. If your credit is weak because of collections, delinquent mortgage payments, judgments, slow payments, lay off from the job, high debt ratio, and you have been denied a conventional loan, then you may not have another alternative other than turning to a hard money lender to save your home.
Hard money and private money investors will be the answer to your problem if you have low credit scores and are financially distressed. Generally, a hard money loan is based on equity in the property and is not FICO driven. Most hard money lenders will require a 65% loan to value (LTV) although some will go as high as 75% depending on your circumstances.
Hard money lenders write their own guidelines, most are not tied to other investors but may be using their lines of credit to finance your loan. Therefore, always negotiate the best deal with the lender for better terms if you feel that you are a good credit risk.
In some cases, hard money lending is very similar to a stated income loan. The investor will not require much information regarding employment and assets, their only concern is the amount of equity in the property. The terms of the loan are usually about 6 months to 1 year, however, this varies with the type of investor selected….hard money or private money. Be sure to read my post on hard money vs private money lenders.
I am not a strong advocate of this type of loan because of the expense, but I understand how this loan type can save a family’s livelihood. This may be your only option to save your home. If you have run out of all other options and can obtain a hard money loan for a short period of time to put you back on your feet, then this may be a wise choice.
In any event, best of luck to you.