Are you tired of having your loans turned down by hard money lenders? Hard money lending is an essential tool for many real estate investors and presenting your loan to a hard money loan officer is much like first impressions – you only have one shot. The following are “must do’s” when applying and preparing a loan package for a hard money lender:
The Executive Summary
The executive summary is a crucial item that often gets overlooked when submitting a loan to a hard money loan officer. Many times hard money Residential or Commercial lenders will only receive an email with a bunch of attachments, and no explanation of the actual deal itself. Providing an executive summary will help the lender understand a large amount of material without reading it all.
A little about yourself
This section should include a standard Fannie Mae Loan Application (Form 1003) when applying for a residential hard money loan or a current Personal Financial Statement when applying for a commercial hard money loan. You also need to include additional items about yourself, e.g. a copy of your credit report, your previous two years federal income tax return (Form 1040), a copy of your driver’s license and a brief resume of your experience.
If you are purchasing a residential or commercial property, include a copy of the Purchase Contract. If you are looking to refinance a residential or commercial property, always provide an opinion of value. Preferably, a real estate BPO (Broker’s Price Opinion), but at least some sort of market analysis is always beneficial. Generally, a hard money lender will require their own appraisal; however, validating your understanding of the market will be one of the keys to your success. You also need to include important items about the subject property, such as the Commitment for Title, a copy of the survey, photos, inspection reports and repair estimate (if there is rehab/construction involved) from a general contractor.
For income producing properties, you always need to include financial statements on the subject property (both a Balance Sheet and Income Statement) for the previous two years, along with a recent year-to-date financial statement. If you are looking for a commercial hard money loan and the borrower will be a corporation, be sure to include the financial statements on the borrowing entity (and any related entities). Again, you need to include the previous two years financials and tax returns, along with a year-to-date financial statement (Both income statement and balance sheet). The financials will support your ability to repay the requested loan.
Providing a complete package to a residential or commercial hard money lender will greatly increase the chances of your next hard money loan being approved.