A hard money loan approval process can be much quicker than one for a traditional loan. A private money lender typically requires minimal documentation and uses a much more common-sense approval process. Traditional financing, by comparison, requires a long list of documents, including tax returns, bank statements, profit and loss statements, and other information that is necessary to approve a loan. One West provides easy and fast approval to investors looking for hard money loans, so contact us today!
Build On-going Relationship
Getting approval for a hard money loan is easier if the borrower has a good working relationship with the hard money lender. If a borrower has made timely payments and is not having financial troubles, they can easily qualify for a hard money loan refinancing. Proven property rehab experience is helpful too. The key is to choose the right hard money lender and maintain a good relationship with them.
Private Money Loan Factors
A hard money loan approval is based on a number of factors, but the most important one is the Loan to Value (LTV). LTV is a measure of the equity in a property, and a lender will check its value online upon receiving the application. A low LTV means the loan amount will be approved, and a high LTV indicates a higher chance the loan will be denied.
A private lender will, of course, evaluate potential borrowers based on their ability to repay the loan. They will also require the real estate investor’s to fill out hard money loan application forms, which are brief forms that detail the borrower’s income, assets, and liabilities. Applicants should also provide information about the property they are seeking to buy, its value, and any other relevant information.
Along with documentation needed for the loan application, real estate investors should include other real estate with substantial equity. This can potentially lower the interest rate. This strategy is called cross-collateralization. If the borrower owns two or more properties, they should list them on the loan application to qualify as collateral.
While traditional lenders require a high credit score, hard money lenders take other factors into account. The lender will consider your property and after-repair value along with your personal credit score when approving a loan. Hard money lenders also provide interest-only financing options to their borrowers.
The amount of hard money loan approval varies greatly, but the average is 60-75% of the property’s ARV (After-Repair Value). Although the amount can vary, the points are typically paid by the borrower when the loan is approved. While the amount of paperwork required for a hard money loan approval depends on the value of the property, it is important to note that the process is often significantly faster than for a traditional mortgage. In some cases, a hard money loan can be approved in just days with the proper documentation. This is a key advantage of hard money loans, as many lenders do not have streamlined processes. If you’re looking to get a streamlined hard money loan approval, One West is your partner. Contact us today!