Do Hard Money Lenders Lend on Primary Residences?
This is another hotly debated topic in the world of hard money lending and a question we are asked 20 times per day.
I will give you our answer from a hard money lender’s perspective (based on risk and underwriting). If you have questions about your State’s lending laws, please consult an Attorney.
Short answer: We do not lend on primary residences and we don’t personally know any hard money lenders that do.
Longer Answer: In some states, mainly in the West, a hard money lender doing only commercial/investor loans will still have to have the same residential mortgage lending license as a normal “consumer-based” mortgage lender. Doesn’t make much sense but that’s the case. And since they have to have the license anyway, they might as well learn how to be RESPA and TILA compliant and do some loans for primary residence homeowners. It’s another line of business (maybe not for every lender, but we’ll get to that soon) for them. If you are in the West, chances are you can find a hard money lender doing primary residence, consumer-based loans.
In many Eastern states (such as DC/MD/VA, the states where we do most of our business) there is a distinction between primary residence, consumer-based loans and commercial/investment property loans used for business purposes. Hard money lenders doing commercial/investment/business loans are not required to have the primary residence, consumer mortgage lending license. It doesn’t apply to what we do.***
So there are some legal reasons, in many states, not to do primary residence loans.
But, more importantly, there are some underwriting and business reasons not to do them either.
Here is the most important reason:
It simply isn’t our target market. We are in this business to lend to real estate professionals, people who make most or all of their income with their real estate investments. People who are serious about their business and are experienced in real estate investing. People who use our money to make more money, and are happy they did. People who come back for more loans each month. True professionals.
We are not in this business to lend money to homeowners who aren’t able to get a bank loan and might have a troubled financial situation. It’s not what we do. If other lenders do, that’s their business. It’s just not what HMB is about.
I hope that explanation clears up this issue for people.
If anyone is looking for a hard money loan for investment purposes, please apply here:
Thanks! I hope 2011 is starting off strong for you. Stay tuned for more.
***There is an exception in some states near us where a person’s business could take a loan and collateralize a primary residence, but it’s rare and doesn’t come up often.