why would a hard money lender not make this loan? 65% 1st Mortgage from lender seller second for 35%?

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If in fact the lender wants to make sure the house has enough equity in case they have to foreclose, they have more than enough equity to give them that comfort. When you consider that the buyer has good credit, why would the hard money lender not make that loan? The only argument I can somewhat give credence to is that the buyer has not put any of his own money into the deal, and is more likely to walk away if something goes wrong. But I would argue that the lender in this case is more protected than in a typical 5% down conventional house purchase loan where the borrower puts 5% down even when you factor in PMI.

4 Comments
  1. Reply
    Biggie @ Arbor Mortgage
    February 15, 2011 at 1:09 pm

    It is the total loan to value on the home @ 100% I don’t think there is a hard money lender out there that would do this loan. The buyer has to put some money down, probably at least 10%.

  2. Reply
    kemperk
    February 15, 2011 at 1:36 pm

    if it is a house to occupy, skip the hard money and ask for a first and 2nd mortgage,
    for 80/20–which I got for my house. [and I put nothing down]

  3. Reply
    RE its what i do
    February 15, 2011 at 1:50 pm

    Hi Jess,

    Actually a hard money lender wont touch this scenario because you will be over financed. Hard money lenders always charge points and a high interest rate on the money that they loan out. Those points added to the 65% that you already need and a 35% second (regardless of where it comes from) puts the amount borrowed on the property above 100% and you have not put anything into the hat!

    As an aside, hard money lenders are very astute at putting the numbers together and due diligence. If they wont fund the deal its because its not a deal.

    Regards

  4. Reply
    Rosemary C
    February 15, 2011 at 1:50 pm

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