Let's Make A Deal
When seeking a loan, there's nothing worse than delays in closing. You've done your homework. You've submitted your documents. You've done your part. Now the waiting begins... Fortunately, borrowers can minimize this time significantly. We will examine these in detail as I show you 10 tips to make sure your hard money loan closes fast.
Table Of Contents
1. Property Value
Hard Money lenders will consider the value of the property before almost all other variables. It is wise to speak to your local realtor, as well as do your own research in order to determine a suitable approximate. Accurate appraisals can provide your lender with helpful proof of value, but keep in mind they will also rely heavily on their own analysis and market research. Make sure to let them know if you’ve made any renovations to the home, and make sure to describe in detail not only what was done, but also the cost of doing so.
2. Property Condition
The condition of the property in question will also be a large factor for your Hard Money lender to consider. Real estate appraisers use a scale of C1 (New) to C6 (Complete Redevelopment) in order rate property condition. Your lender will need an precise evaluation of the current condition of your property as early as possible so they can direct you to the best possible option for your particular situation. Most Hard Money lenders will lend on several different property types and conditions. As so, they make these decisions on a case-by-case basis.
3. Recent Transactions
If the property has changed hands in quick succession with notable value increases, most lenders want to know ahead of time. They will need to understand why the sudden increase in value before underwriting the loan. Waiting until late in the transaction will almost always cause headaches that are easily avoidable.
4. Non-Arms Length Transactions
A non-arms length transaction is a specific type of loan in which the purchaser and purveyor have a pre-existing business, personal or familial relationship. Only some private lenders will make these loans, and they will most likely want to know up front.
Your Hard Money lenders will provide you with a detailed fee worksheet showing all of their fees well in advance of closing. It is wise to read them carefully. Unfortunately, it is not uncommon to have a deal fall apart at the closing table over borrowers not truly understanding the fees.
When refinancing, your Hard Money lender will need to know of any liens on the property. These will come up during the title phase, and they can take some time to get cleared up. If you’re buying a property, most lenders will require a clean title to close. Documents such as releases of old mortgages usually take substantial time and effort to address.
7. Borrower Name
If you’re refinancing, your lender will probably consider whether there is anyone else on the title with you. If so, they will most likely need to be available to sign documents, as well as provide necessary information about themselves.
8. Investor Insurance
I can't emphasize this aspect enough. Do yourself the favor of researching and choosing your insurance product as early as possible. Most investors underestimate how laborious and tedious this process can be.
9. Borrowing in an Entity
Although some lenders will loan to individuals, it is in your best interest to form some sort of business entity. The majority of private lenders will usually lend to entities, such as corporations, LLCs and partnerships. It is wise to make sure your entity is fully established and is in good standing. More often than not, all of the documents will be needed to complete your loan.
10. Multiple Loans
If you are going to ask for more than one loan from the same lender, either as yourself, as a co-borrower or through an entity, most lenders will require cross-collateralization to consider underwriting this type of loan.