Hard Money Commercial Lending Basics
What is a hard money commercial loan?
The definition of “hard money commercial” or “HMC” when referred to in real estate financing, is essentially a non-bankable loan. The name hard money commercial is frequently interchanged with “no-doc” or private loans. For a HMC loan, the underwriting decisions are based on the borrower’s hard assets (real estate). HMC loans typically close relatively quickly. Fairview Lending is the leader in HMC lending (NO-DOC / Private lending)
Hard Money Commercial Lending verses traditional lending
Traditional loans from banking institutions rely heavily on borrowers income, credit, tax returns, etc.. as opposed to a HMC loan’s primary reliance on the hard real estate asset. Along with requiring substantially more documentation, conventional lenders have minimum credit scores (typically low 700 Fico and above) as opposed to HMC loans that are underwriting on the collateral as opposed to the borrowers credit (Fairview Lending has closed loans with FICO scores in the low 400s). Along with different underwriting standards, loans on conventional commercial loans can take months to close; HMC loans close much quicker. The final important differentiator between hard money commercial financing and conventional financing is the interest rate. Since there is more risk in a true collateral based loan, the interest rates are higher than a conventional mortgage.
When is a hard money commercial loan appropriate?
There are numerous circumstances where a HMC loan is the best option for a client.
- Borrowers with impaired credit (Fairview Lending can lend to borrowers with any credit)
- Tax Liens/Judgements/unpaid utility bills, etc…:
- Partner Buyout
- Owner Occupied properties
- Time constrained borrowers
- Foreclosure avoidance
- Foreign Nationals
- Complex loans with multiple pieces of collateral
See the following resources related to HMC Lending
- Key tips prior to utilizing a hard money loan
- What is private/no-doc lending vs. hard money lending?
- How are Hard Money loans underwritten?
- What is Fairview Lending’s loan process?
- Can I broker a loan to Fairview Lending?
- I have never done a commercial loan, how do I switch from residential lending to commercial lending?
- Understanding the total cost of a loan Prepayment verse Interest Guarantee / Lockout / Defeasance