Five Trade Tips: Closing Hard Money Loans Fast

Hard money lending is a dominant trend that returns when interest rates increase, and in the case of the housing bubble bursting, banking institutions tightening their belts and becoming mortgage misers.

The days of breezing through loan documentation and getting a mortgage are a thing of the past. Today banks are requiring everything short of a couple’s first-born child, causing more pain and agony. Just when people begin to breathe a sigh of relief, the mortgage lender calls and says the underwriter wants confirmation a measly bill was paid seven years ago. Really? People collapse in utter exhaustion, wondering if their dream home or pioneering commercial construction project will indeed ever come to fruition. This is where private money lenders have an advantage, a niche, that allows them to swoop in and rescue borrowers from the depression-laden mechanics of the mortgage industry.

There are a number of things a borrower can do to help accommodate hard money lenders, ensuring that loans are processed smooth and fast.

Buy Right – If a borrower is buying the right property – meaning one that is a no brainer as far as what the After Repair Value (ARV) holds, then hard money lenders will be more willing to cover low down payment loans and assume higher long-term risks. For example, a borrower is looking at a home and the purchase price is $100K. Repair costs are approximately $50K, but the ARV is $300K. What investor doesn’t like that kind of profit?

Inspectors and Contractors – Hiring experts to help create detailed lists outlining repair costs and ARVs definitely makes borrowers more appealing to hard money lenders.

Exit Strategy – Having a detailed plan makes a borrower much more appealing to a hard money lender that is funding this capital housing venture. For example, if a borrower wants to rent once the property is repaired, having detailed figures about the local rental market, including the vacancy rate is necessary. If, however, an investor is looking to flip the home, then he/she needs to have information about what is the best time of year to list the home for sale, starting price, etc.

Red Flags Cropping Up – If a borrower has experienced a prior bankruptcy or has poor credit, it is best to notify the lender ahead of time. Having unexpected red flags crop up along the way does not put investors at ease.

Track Records – If a borrower has used a private money lender in the past and has always paid on time, he/she should notify the hard money loans company. Not only does this help investors feel more at ease knowing that a borrower is responsible and repays debt, but also it helps elevate a borrower’s current loan status into one that is a priority.