Most Common Documents Needed To Close a Hard Money Loan

A hard money lender is an excellent alternative to traditional bank financing for real estate investments and properties. An ideal solution for complicated developer projects, fix and flip properties, commercial developments and even raw land subdivisions, hard money lenders typically require far less documentation than traditional government-backed banks and mortgage lenders.

The banking industry, heavily regulated by government rules, requires a plethora of documentation and financial paperwork. Many times real estate investors are required to provide even more documentation than standard residential home buyers. Sometimes this documentation is not acceptable to underwriting standards and guidelines, leaving borrowers with a property under contract but no available financing means. This is where a hard money lender can offer expertise, knowledge and the creative financing capital to propel a contract to close.

What types of documentation are required for typical hard money lenders? This includes, but is not limited to:

• Purchase Contract – As with any type of loan, an executed Purchase and Sale Agreement is required to proceed with any type of purchase. If the property is being refinanced through a hard money lender, a payoff statement will be required showing outstanding funds on the loan.
• Preliminary Title Report – This helps a lender determine if the property will transfer with a clear title or if the title has been clouded, often with liens and other outstanding loans (such as tax liens, mechanic’s liens, IRS liens, etc.). In the Purchase and Sale Agreement, there is an area where both the buyer and seller must agree on a Title Company. When the Title Report is completed, a copy is given to the buyer and seller, as well as the lender.
• Identification – To help prevent loan fraud, if the borrower is an individual, most hard money lenders will require two forms of identification. If the borrower is, however, a business entity, an operating agreement or corporate documents may be required. A business will also need a Certificate of Good Standing with the local Secretary of the State.
• Proof of Funds – A private hard money lender will want proof that the borrower has the down payment funds necessary to close. Often a copy of a bank statement or financial account balance will suffice.
• Proof of Insurance – This will be required for a property that is being purchased or refinanced.

Optional Items – This may include a loan application, a copy of a lease or rent rolls on rental income property, credit reports, etc.