What is the underwriting criteria for hard money loans?

A hard money lender considers the underlying collateral securing the hard money loan as the primary and most important factor while evaluating loan prospects. All other criteria is secondary to this primary factor. The equity which acts as a cushion or margin of safety determines the amount of time and the kind of loan terms a real estate investor receives. In addition to the property and its equity, a residential or commercial hard money lender also considers the experience of the investor in completing real estate projects whether they are apartments, residential, industrial, commercial or hospitality properties.

Other factors will also be taken into account but they are just secondary in importance to the after completion value and supporting equity in a given property. Credit history and credit scores which are usually the most important factors in conventional loan underwriting are not that important. Borrowers with extremely bad credit have managed to secure loans through private money lenders.

When it comes to securing a bridge loan or rehab loan from a hard money lender, nothing takes precedence to lots of built-in equity and the prior experience of the investor. The hard money loan underwriting is driven with a motive to recover the loan amount irrespective of risk factors like market price stagnation or other unexpected market factors.