Throughout New Jersey, Philly, and the rest of the region, developers and commercial investors regularly secure loans to help them pay for investment properties, repairs and remodels, and other similar purchases. Sometimes, however, a traditional loan is hard to secure and in these cases turning to a private lender for a hard money loan is the right option.

One of the primary questions we hear is ‘what qualifies me for a hard money loan’? It’s important to understand that since hard money loans are offered by private lenders in most cases, the various requirements may vary. But in general you can expect a few key things to be looked at. These include:

  • Property Value – The loan is secured by the property it’s applied to. As such, you’ll need to show its value clearly. This includes estimates from appraisers that are often based on comparable properties in the area. Don’t assume your realtor is right with an estimate – you’ll need more than that to prove the value to a lender.
  • Income And Bank Statements – You need to prove your income and show your bank statements to support your capability of managing money and paying for the loan. This often includes tax returns for years past, two to three months of bank statements, and more.
  • Budget – If you’re borrowing for development, repairs, or remodels – such as on a house flipping project – you’ll need to show the budget and the plan of rehab in order to illustrate just what the money is being used for.
  • Credit – Your credit history will also be looked at, and your credit report will have an impact on whether or not you receive the loan. However, it’s not as important as it is with traditional loans and as such it’s important that you don’t focus solely on this – a lot of other variables come into play.
  • Exit Strategy Plan – Private lenders take serious risks when providing you with money. It’s good to have a clear plan to pay off the loan if you find that you can’t sell a flip property as quickly as you hoped for. Detailing this plan will help lenders give you a hard money loan with more confidence.

Hard money lenders are here to help you. But it’s important that you know how to qualify for a hard money loan before you apply. That way, you’ll improve your odds of getting the money you need.