Here’s How to Get Approved For a Hard Money Loan
Hard money loans can help you bridge the gap between an ongoing real estate transaction and a long-term financing solution.
While getting approved for a hard money loan is relatively easier than applying to a bank or a credit union, certain factors can derail your chances of securing a hard money loan.
We’ve come up with some practical ways that’ll help you secure a hard money loan for your next real estate transaction.
Showcase your Success
Since hard money loans and bridge loans are high-risk investments for private lenders, they’ll always prefer to lend to a successful house flipper or developer.
To stand out from the hard money applicants’ crowd, you must show your successful history of developing real estate property or flipping houses.
Let the underwriters know how long you have been in the business, how many real estate deals you’ve closed, and successfully negotiated a high resale value for the flipped property. A peek into your successful real estate career will assure the private investors of your ability to repay the loan.
Set a High-Value Collateral
If there’s one thing that could get you a stamp of approval from the underwriter, it’s high-value collateral.
In hard money loans, credit scores are replaced with high-value collateral. Since hard money loans come with high risks for the lenders, they want to know the value of your collateral against which you’re applying for a loan.
It acts as a form of protection for lenders. In case borrowers default on their loan repayments, the lenders can move ahead, seize the collateral, and sell it to recover their losses. Therefore, we recommend that you list the current value of your collateral property and its anticipated resale value (ARV). Collaterals with high ARVs make for a profitable deal for the lenders, and can get you instantly approved for the loan.
Make a Hefty Down Payment
Think the down payment doesn’t have much say in your loan approval process? Think again!
A large down payment, more than 20%, assures the property seller that you’re seriously interested in the property; it conveys a similar message to your lenders.
A hefty down payment means that you’re paying a larger percentage of the home’s value, thereby making it low-risk for the investor.
Moreover, it assures the lender that they’ll need to finance the remaining 80% or less of the property’s value. Setting a large down payment would ensure that you get a low LTV ratio, smaller loan amount, fewer monthly payments, and reduced risks for both the investor and yourself; a complete win-win situation for everyone!
Your Repayment Strategy is Just as Important
A carefully crafted repayment strategy might just win you the seal of approval!
While most borrowers are focused on getting the approval process right, they tend to forget the most crucial part of the loan process; the repayment strategy.
Before you apply for that hard money loan:
- Consider crunching your numbers.
- Review your income, current liabilities, the loan amount you need, and the interest rates you’ll need to pay.
- Devise a straightforward plan on repaying your loans on time.
Moreover, your exit strategy is the one thing that can make you fit for a hard money loan. Tell the lenders how do you plan to repay the loan at the end of the loan period.
Will you be selling the high-value flipped property? Or will you sign up for another long-term refinancing plan?
These details will convey the right message to the lender, and they might just approve your loan application!
If you need to find the best private money lenders for your hard money needs, try to build connections with real estate industry professionals. Professionals like real estate agents, investors, property developers, and construction companies can help you connect with some of the leading private lending firms.
Moreover, their referrals will help you navigate through the different private lenders, their firms’ policies, and details about their turnaround rates.
You could always seek help from outside the real estate industry. Friends, family members, acquaintances, and colleagues can refer you to reliable private money lenders that offer low-interest rates and have feasible loan terms. These referrals and suggestions will ensure that you opt for a credible and reliable hard money lender and have access to funds within just a few days.
Get in touch with Credible Private Money Lenders.
Before you settle on that one private money lender, it’s crucial that you meet up with various private lenders out there.
Get to learn more about their hard money application process, how long they have been in the industry, and how they can help reduce risks for your hard money loan.
Moreover, you can inquire about the company’s policies, the loan terms that they offer, and if they’re willing to create customizable financing solutions. Weighing in these factors can help you decide on a private money lender and help you ensure that you’re placing your trust in the right firm.
Remember, each of these private money lenders will come with different turnaround rates, approval rates, loan terms, and credibility.
Evaluating the time frame of your hard money loan, the loan terms, and the private lender’s reputation will help you choose the right lender for your hard money loan.
Consider Commercial Private Equity for a Hard Money Loan
If you need to make a down payment or close a real estate deal real quick, we can help you out.
At Commercial Private Equity, we have over 75 years of experience and have rescued thousands of real estate investors. Our clients don’t have to go through the hassle of improving credit histories and credit reports. With our asset back hard money loan policy, we offer low interest rates and low LTV ratios to help reduce the risk for our clients and our private lending firm.
Call us at 404-301-8633 or head to our website to get more details about our hard money loans, commercial bridge loans, and construction loans all across the United States.