In our Youtube video above, Senior Sales Associate, Gunnar Sevart shares his thoughts on working with investors with bad credit.

The term “hard money” means a loan based heavily on the hard asset (i.e. physical real estate and its accompanying value), and less on the individual. Traditional banks, on the other hand, rely heavily on investor’s scores to determine if they will lend money to an individual. Hard money loans came about because banks often can’t or won’t lend on highly profitable deals because the borrower has a less than stellar credit history.

Hard money lenders wanted to be able to fund these deals and be accessible to borrowers who are capable of completing their project successfully regardless of their credit score. This fills the niche and makes it easier for a wide variety of real estate investors to acquire and flip properties versus only the high-end developers that banks may choose to work with.

Most hard money lenders will still check a borrower’s credit score in order to have an understanding of their full financial picture, but items like cash available for a down payment and the property deal itself carry far more weight. When a borrower has a bad credit score, but a good deal, many hard money lenders will still work with them after collecting more info on any past foreclosures, bankruptcies, or other items that negatively impact a credit score.

At Washington Capital Partners we never want to turn someone away for their credit score. If you have a deal, but you’re worried about your credit be prepared to explain your financial situation including any past foreclosures or bankruptcies during the loan approval process. A low credit score isn’t always a deal-breaker.

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