©Grant Cochrane - freedigitalphotos

©Grant Cochrane – freedigitalphotos

Many foreclosure victims and foreclosure investors ask this question. They want to know how a hard money loan can help them get funding for a foreclosure property. This is a subject that has been poorly explained in the past by the “foreclosure guru’s” (AKA: Scumbags) that put on the foreclosure investment seminars. (90% crap and lies) People have been told that a hard money loan is very easy to get and that everyone will qualify. Investors are even told that they can get up to ten (10) hard money loans a month, regardless of their credit or income. This is not true. In my opinion, hard money or private money loans are harder to qualify for (and close) than a traditional “soft” money loan.

So what’s the difference?
Here is a simple list to show differences between a hard money loan and a soft money loan. Please remember, there are many exceptions to the rules from one lender to the next, so don’t expect this to be accurate across the board.

Hard Money (Private Loan)
FICO score is not a deciding factor
Debt to Income Ratio (DTI) of 50% or better needed
Income must be verifiable
Loan to Value (LTV) Max. is 60%-70%
Value of purchase may be based on appraisal, rather than purchase price (very few lenders offer this)
Limited availability; Most hard money or private money lenders have a limited “territory”.

Soft Money (Traditional Loan)
Minimum FICO score of 580 needed
Debt to Income Ratio (DTI) of 50% or better needed
Income may not need to be verified if FICO is 740+
Loan to Value (LTV) can go up to 100%
Value of a property is always based on the purchase price (refinance excluded)
Available Nationwide

Again, this is meant to be used as a general hard money/soft money comparison. The guidelines will vary slightly from one lender to the next, but at this time, these should be very accurate.

If you are a foreclosure victim looking for a hard money loan, or an investor who needs to find a lender, please use our evaluation form to get a free evaluation or pre-approval.

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