Hard Money Loans: Closing Documents

While every hard money lender’s requirements vary, there are a number of common documents required by most private money lenders to successfully close a loan. This includes, but is not limited to the following:

• Executed Purchase and Sale Agreement – If a borrower is completing a loan to purchase property, a fully executed contract is required. Fully executed means that both the sellers and buyers must sign the document, including business partners, husbands and wives, etc., as required by state law. If, however, the borrower is completing a refinance through a hard money lending institution, then a payoff statement from the current lien holder is necessary.
• Preliminary Title Report – A local title company can easily order a title report to ensure that the property’s title is clear, meaning not subject to any further loans, liens or judgments. Some hard money lenders have discounted rates with local title companies, so borrowers should ask if there is a preferred title company in the area.
• Identification – With loan fraud on the rise, loan companies and escrow departments (who typically help facilitate closings) require two forms of identification, that is, if the borrower is an individual. If the borrower is a corporation or business, then corporate documents or an operating agreement will be required. Some lenders also require that businesses be in good “Good Standing” status with the Secretary of State.
• Proof of Funds – If a borrower is putting a percentage of money down as a down payment, a private lender will likely request proof of said funds. Typically a bank statement, retirement account statement or other legal form is acceptable.
• Proof of Insurance – As private lenders do not want to endure a devastating loss, the borrower is required to show proof of insurance for either a purchase or refinance, especially for a dwelling that resides on the property.
• Optional – Some lenders require their own loan application, a copy of leases if the borrower owns rentals and a recent credit report.

Pre-Approval for a loan is highly recommended, as this provides the borrower with the opportunity to understand what is required to qualify for the actual loan. Some lenders require two years of tax returns, while others require less documentation, which is the benefit of using a hard money lender.