Short Answer: Hard money loans are available through several nationwide lenders that will work with bad credit, including Do Hard Money, FBC Funding, LendingHome, Lima One Capital, and Patch of Land. Below, we have the details of each of these lenders, and well as a safe borrowing checklist to help you find the right hard money lender for your investment property or home.
What Is a Hard Money Loan?
There are many types of asset-backed loans. Payday loans, pawn loans, and car title loans are all forms of collateral loans; you put up something in order to get a loan — a paycheck, a valuable item, or your car — and either get it back or lose it depending on if you pay off your loan.
A “hard money” loan specifically relates to real estate. Whether you’re trying to finance an investment property, a new home, or save the home you’re in, a hard money loan from a private lender uses real estate as collateral and may help you when a bank won’t. A hard money loan is similar to a bridge loan — however, a hard money loan suggests financial complications.
Many companies will work with bad credit, but none of the nationwide hard money lenders we surveyed will issue a loan without a credit check. However, most of the providers don’t require a minimum credit score.
Safe Borrowing Checklist
When considering a hard money loan, there are some important questions you should ask. Hard money loans and private lending, in general, are regulated differently than standard consumer loans.
Beware: There are some shady lenders out there. Use this checklist to protect yourself from predatory loans.
Is the lender licensed in your state?
Some states allow private lenders to make a small number of loans without being licensed, but you should ask. Exact licensing requirements vary by state, but generally, a license ensures that the lender has met the state’s education and testing requirements and has submitted its financial reports to the state for review. You should be able to find a lender’s licensing information through the Nationwide Multistate Licensing System.
Is the interest rate legal?
Individual states set their own usury laws that cap the amount of interest you can be charged. Check your state usury laws through the FindLaw directory. Interest rates can be particularly high for customers with poor or minimal credit history, but must still comply with state law.
Is the loan for your home or investment property?
Some loan programs only apply to investment properties, not your personal home. Make sure you’re applying for the type of loan you need before you pay any application fees or other costs.
What’s the payment structure?
It’s important to note the following, so you’re prepared to pay back the loan according to the lender’s terms, avoiding missed payments and similar risks: Will you be making regular monthly payments? Do the payments apply to the principal loan amount, or is this an interest-only loan? What happens at the end of the loan term? Will you have a large “balloon” payment due? What will happen to your property if you can’t make the balloon payment?
What are the fees?
Normally, a lender charges “origination points” when you take out a loan. Essentially, you’re pre-paying a few percentage points of the interest rate upfront. You may also have to pay out of pocket for a property appraisal, closing costs, and other fees. Some lenders will finance these costs into the loan amount. Others will require fees to be paid at closing. Make sure all fees are disclosed in writing before you agree to anything, and if payment is required at closing, make sure you have the money you need before signing on the loan.
Have a real estate lawyer check all the loan documents.
The List of Nationwide Hard Money Loan Providers
The following lenders are qualified in most parts of the U.S. and will work with you even if you have bad credit. However, none of these lenders offer hard money loans for owner-occupied properties.
Do Hard Money
- Credit requirements: A credit check is required, and your score will affect your interest rate and fees. There is no minimum credit score. As long as the value of the property makes the loan worthwhile, Do Hard Money will lend to you.
- Loan amounts and locations: Loan amounts go up to $250,000. Do Hard Money lends in 34 states and the District of Columbia, either directly or through a referral network.
- Property type: Short-term loans on residential investment properties, particularly for rehabbing and flipping
- Interest rates and terms: Interest rates are quoted per month. Fees start at 5.5 points, plus closing costs. Do Hard Money requires a loan-to-value ratio of 70%, which is calculated against the value of the property after repairs. The result is the company may lend up to 100% of the purchase price, including closing costs. The maximum loan term is five months.
- Learn more about Do Hard Money
- Credit requirements: FBC’s Investor Bridge loans have no minimum credit score, as long as you prepay four months of interest and meet other financial requirements. Other loan programs require a minimum score of 550.
- Loan amounts and locations: Multi-family, mixed-use, and construction loans have a minimum of $100,000. Loans on commercial buildings start at $150,000. Residential loans start at $75,000, and the Investor Bridge program is capped at $2 million. FBC lends in 42 states.
- Property type: The Investor Bridge program applies to residential properties. With other loan programs, you can borrow against residential or commercial property, including single- and multi-family homes, mixed-use buildings, mobile home parks, offices, student housing, hospitality properties, retail spaces, and self-storage buildings.
- Interest rates and terms: Interest rates range from 7% to 12%. Fees range from two to five points. FBC requires a loan-to-value ratio of 70% in the Investor Bridge program, but if your credit score is 650 or higher, you can get up to 75%. FBC offers interest-only loans for 12 months.
- Learn more about FBC
- Credit requirements: LendingHome requires a minimum FICO score of 550, proof of income, and a background check. The terms of the loan are based more on the value of the property than on your credit history.
- Loan amounts and locations: Typical hard money loans are offered from $75,000 to $1 million. LendingHome operates in 25 states.
- Property type: Hard-money loans are offered as short-term bridge loans on residential real estate, including single-family homes, multi-family buildings up to four units, condominiums, town-homes, and planned unit developments.
- Interest rates and terms: Interest rates start at 7.25%, and the average range is 9% to 12%. Fees start at $2,500 and go up to 2.5 points. LendingHome will finance up to 90% loan-to-value and 90% of the purchase price. There is an application fee of $350, and you will need to pay upfront for the property appraisal and some initial rehab costs. Loan terms must be 12 months or less.
- Learn more about LendingHome
Lima One Capital
- Credit requirements: Lima One’s FixNFlip program will let you borrow with a cosigner if your FICO score is under 600. Other loan programs require a credit score of 620 or higher.
- Loan amounts and locations: Loans up to three years on rental properties may be from $50,000 to $2.5 million. Loans up to two years on multi-family buildings with five or more units may be from $250,000 to $5 million. Long-term loans for rental properties have a minimum of $50,000 and a maximum of 75% of the property value. Lima One operates in 41 states and the District of Columbia.
- Property type: Non-owner occupied single- and multi-family residential investment properties (no owner-occupied properties). If you own another property, you may be able to use it as collateral for your down payment.
- Interest rates and terms: Interest rates vary from 5.25% to 12%, depending on your credit score and the type of loan. Fees start at 1.5 points, plus closing costs. Short-term bridge loans may be up to 70% of the After Repair Value. Loan terms range from 13 months to 30 years, depending on the type of property and the loan structure.
- Learn more about Lima One Capital
Patch of Land
- Credit requirements: Patch of Land requires a credit check, but there is no minimum score. You’ll need to provide proof of funds and a background check.
- Loan amounts and locations: Loans range from $100,000 to $3 million, depending on the type of property. Patch of Land operates nationwide, except for in Arizona, Idaho, Minnesota, Nevada, Utah, and South Dakota.
- Property type: Non-owner occupied residential properties, including single- and multi-family homes, condominiums, and townhomes. The company also lends on commercial properties, including mixed-use buildings, office and retail spaces, and light industrial buildings.
- Interest rates and terms: Interest rates start at 8%. Fees include your appraisal, closing costs, and origination points based on your loan terms. Patch of Land will finance 70% to 80% loan-to-value, depending on the type of collateral. Loan terms are one to 12 months, with six-month extensions available.
- Learn more about Patch of Land
Suggested Article: Collateral Loans on Vehicles: How to Get One
If you need a hard money/collateral loan, bad credit won’t stand in your way. A hard money loan from a private lender could help you finance an investment property or save the home you’re in, even if you have poor credit. When it comes to hard money, the property’s value is more important than your personal history. Between the national lenders and online directories we provided above, you should be able to find a hard money lender that suits your needs. However, before you sign, use our safe borrowing checklist to vet your lender and find the right hard money loan for you.