Applying for a hard money loan might seem like a difficult process, but rest assured that this will be one of the easier loans you’ve applied for. Once you apply for hard money a few times and build your relationship with a lender, you’ll be more comfortable with this process and how it can help you be competitive in this industry.
As you complete a hard money loan application, here are the most important steps to follow.
Step 1: Find a reliable hard lender
Research lenders in your area to see what options are available to you. Do not think that just because you were denied a loan by the bank, you have to take whatever comes your way. Do your research so that you can find a lender who is truly interested in financing your real estate project. Some ways to identify a trustworthy lender include:
- Legitimate website with visible contact info
- Good relationships with lenders
- Has financed many successful projects
Step 2: Present the value of the property you want to purchase
Once you find the hard lender you want to work with, the application process can begin. Hard money loans are backed by the value of the property, not your credit score. Your lender will probably ask for architectural plans, construction budgets, and bid sheets for repairs and renovations. The lender wants to know that they are making a safe investment.
Step 3: Show your financial plan
Lenders want to know that they will get paid back. Even though hard money loans don’t require a down payment, many lenders will only fund 70% to 80% of the deal. You will be required to front the other 20% to 30%. This lowers the lender’s risk and shows that you are equally committed. Be prepared to do this when you turn in your application.
Step 4: Provide the lender with additional documentation
Hard money lenders are far more flexible than banks, but you may still be asked to show additional documentation, such as paystubs, W2 forms, and bank statements. It helps to have this information ready to go in case the lender does ask for it.
Step 5: Review the paperwork
Before signing anything with the lender, it’s recommended to have your lawyer read over it. You want to make sure that your best interests are protected before agreeing to borrow money. It’s also important that you understand everything you are signing. Some borrowers get so excited about funding their project, they overlook crucial details.
First Equity Funding provides hard money loans to investors looking to buy and fix up residential and commercial properties. We are an honest, reputable company that enjoys partnering with the same investors for efficient results. Contact us today to apply for a hard money loan.