While private money lenders might not take much interest in closely examining credit reports, financial histories, and bank statements, they’re still interested in some more high-value and profitable factors.
This blog lists all the factors that private money lenders might consider before approving your hard money loan application. Here’s how it works.
Borrower’s Interest in the Property
Before reviewing or evaluating the collateral value, a private money lender will gauge a borrower’s interest by looking at the down payment they put on the property.
A larger down payment hints that borrowers are really interested in closing the real estate deal and just need some funds to finalize it. Moreover, a larger down payment will bring down the LTV ratio and reduce risks for the private money lender as well.
Borrowers who agree to put a larger down payment on a house can quickly get approval for their hard money loan applications.
How Profitable is Your Property?
Once they’ve gauged the borrower’s commitment with a hefty down payment, private money lenders will proceed to appraise the collateral. Since extending hard money loans can be risky, lenders are always looking for high-value properties that make for a profitable asset for both the borrower and the lender.
For instance, lenders might be more interested in lending to a house flipper who can purchase a property at a lower price, fix and flip it, and resale it at a higher value.
However, if these borrowers fail to repay the loan within the agreed loan duration, the lender can simply foreclose the property and recoup their investment.
It’s important to note that private money lenders prefer to finance properties with a high ARV that will deliver more significant profits in the future.
Minimizing Risks Along the Way
While being new to the real estate industry doesn’t lower your prospects of securing a hard money loan, private money lenders are inclined to finance more seasoned investors.
To determine the risks, they’ll review your real estate history, how many properties you have flipped, and the number of years you have spent in the real estate industry.
New investors can always come up with a larger down payment and present an in-depth house flipping or land development plan. These factors can help reduce risks for the lender, lead them to approve loans, and even offer feasible loan terms for the borrowers.
Get In Touch With Commercial Private Equity For Customizable Financing Options
At Commercial Private Equity, our clients can rest assured that they won’t have to go through a rigorous underwriting process. Our underwriting team examines the loan application and collateral value and doesn’t require credit histories or bank statements for loan approvals. So whether you want to apply for a hard money loan, commercial bridge loan, or construction loan, you can always count on Commercial Private Equity for all your real estate financing needs.
Give us a call at 404-301-8633 to learn more about our loan programs.