Investors can obtain financing by hard money lenders even with bad credit ratings.  These asset based lenders are more interested in the collateral securing the loan than they are interested about the credit of the applicant.  Banks and conventional financial institutions have stern credit requirements in particular in the current lending environment.  Private hard money lenders are open to funding deals submitted by real estate investors regardless of credit and even in cases where the investor borrow has had the blemish of a property foreclosed or even bankrupt.

The first step for a real estate investor is to summarize the reason for any financial setbacks which could have been a period of unemployment or medical expenses, for example.  The letter of explanation will not generally forestall the lender from approving a loan.  Next, the investor needs to present a solid loan package that is complete will all documentation.  The lender is very focused on the exit strategy presented by the real estate investor, however.  

Having a solid exit strategy can mean that the real estate investor already has a suitable buyer for the property who has already qualified for a conventional loan.  Generally hard money lenders will loan for anywhere from three to nine months and offer up the borrower with options for extensions, if necessary.  The lenders are concerned about fashioning certain that the borrow has an adequate amount of time to complete the exit strategy.  For example, the property can be a planned rehab in which the borrower will renovate the property and increase it’s value and then sell the property for a profit.  Rather than pinning the loan qualification on the borrower credit, the lender focuses instead on making certaint that the borrower has adequate experience in rehabbing property.  Real estate investors can also hire an experienced contractor to complete the rehab and that is generally satisfactory to the lender requirements.

Credit ratings actually have little to do with investment property dealings because the collateral is generally within a range of 65 percent of the property value as determined by the quick sale of the property.  That loan to value rating is adequate to protect the interests of the lender.  In fact, sometimes the real estate investor has used a Limited Liability Company or a Corporation to do the property transaction to ensure that there are no other potential liens that could be attached to the property.  While the private hard money lender may charge a slightly higher rate to an individual with poor credit, that is also the norm in conventional bank loans.

Real estate investors with poor credit can still satisfy the requirements of private rehab hard money lenders and establish a business organisation relationship.  Once the investor has successfully completed the transaction, the lender is able to fund other property deals submitted by the investor.  Some lenders will eventually permit loans to be made on more than one property deal at a time.

Real estate investing is dependant on private money during these economic times and has been responsible for helping the market to recover much quicker than anticipated in many of the local markets, such as Southern California, Florida, Phoenix and Las Vegas.  It is projected that more private money will continue to flow to invesors.