As a hard money investor and money manager, I personally receive and underwrite hundreds of hard money loans per year. In light of that fact, I have observed many good practices and many many bad practices. This article is dedicated to educating borrowers and brokers on the best ways to prepare and submit a loan to a hard money lender and to avoid pitfalls that will end with your loan not being funded.
Having all the facts:
When calling or sending information for your loan, many hard money investors will be turned off from a loan when the broker or borrower does not have all the facts.
Borrowers: We receive countless files from borrowers who aren't ready; no property in mind or it takes days if not weeks to get answers and/or paperwork to very simple questions or requests. When an investor asks for a 1003 application or a credit report or a profit and loss statement, don't wait a week or try and convince the investor to move forward without it. Value peoples' time and it will benefit you in the end.
Brokers: When an investor asks you a question about the property, don't respond with "I don't know, I'll try and find out." Know the deal before you send it in. Lack of knowledge on the deal will turn an investor off. Trying to convince the investor to move forward without it will kill your deal. Most importantly, don't waste peoples' time. If you present a deal, and we show interest, your borrower needs to cooperate, at least some of the time. If we say that we're ready to move forward and we never hear anything again, it greatly damages you credibility for the next loan.
Efficient and thorough paperwork in submittal package:
This is where we see the most egregious problems with loan declines. The best example is when we receive a file that comprises of a 1003 application, a credit report, a profit and loss statement, a rent roll, and ten photos. We'd receive that file separated in twenty separate .tif files. The 1003 application is split into five separate attachments; the photos consist of ten separate .jpg files. It is easy to insert photos onto a word document. It is easy to scan a document into a single PDF. If you're unable to do that, fax it in.
Next, be thorough with what you provide. In our case, we ask for very simple information for the most part; submission form, profit and loss, rent roll, and photos (on some loans). On the scheme of things, that is a very simple request, but we will receive no photos or no submission form, or another form used for submission. If you send us what we request, or any investor what they request, then you will have your file reviewed as soon as possible. If you’re not thorough, time is wasted on both ends, and it delays your file to be reviewed.
When we approve a loan, it should take a single day, maybe two for us to receive our conditions. It shouldn't take a week or weeks. If it takes a week or more, then we will re-review the file and sometimes, we decline it with a second look. Don't let this happen to you.
Making your payments:
If your desire is to continue to be able to use hard money for investment purposes then communicate with us and it will greatly reduce a denial on loan #2.
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