Looking for my first HML. I have two investment properties already (trad. financing) and I'm a contractor. Have cash, have a decent credit score. I could almost - but not quite - do a cash deal. Not ready to hit up wealthier investor friends until the 2nd or 3rd one. And I can nearly, but not quite, go to a traditional bank, if I hadn't done quite well in my last business and taken two years off - which ruined ability to qualify until next tax return.
The few HMLenders I've spoken with want all of the following. (Would you - OR DO YOU share all of this info?). I'm fine with most of it, but...
-They want an LLC, very few seem okay with DBA.
-All bank statements, including daily transactions, every page for 5 months. acct numbers on each account, etc., provide full and complete itemized bank statements for the past 5 months.
-Full loan application of course: Assets, Liabilities, Net worth, Full S.O.W.,
-Titles and Deeds on each property I own
-Licences, (even though not required in upstate NY) and all proof of insurance.
-Operating Agreements, Articles of organization for your business
-Copies of identification
-A portfolio of before and after renovations
-Pay for their appraisal and credit check (5 or 600 dollars)
-List of subs AND copies of their insurance...
I could keep going...At what point do you start to wonder what is going on, and if all of it is necessary.? Is this safe, when you are trying to develop a relationship and learn about them as well? Trust goes both ways. Not all these HML's exactly on the radar. Half the time they seem to be just two people with a lot of money. Is this typical for a first HML? I am only asking for 80k on an amazing flip I just had an accepted offer on (a farm house in the Hudson Valley, commuting distance to NYC for only 100k (ARV from certified assessor 190k).
Nothing in your list seems unusual. Yes, its a lot of information. But you're getting a lot of cash from them. Most HMLs are pretty small operations, so the details can vary quite a bit from lender to lender.
Okay. Whew. Bank is definitely easier. Thanks @Jon Holdman
@Christian Lincoln, it all comes down to the level of security you provide with the actual property (ARV percentage), the rate you are getting, all these are factors. NY is also tougher in terms of paperwork than almost anywhere else in the country - in my experience. After all, it is the world capital of fraud activity, it's even riskier to lend money in NY than anywhere else and lenders are real big on personal diligence.
You did not include any comment about a personal guarantee which is also something you may have to consider giving up also.
You should talk to as many HMLs as you can and discuss all the issues, rate, diligence requirements, timeline, all of that, make a checklist. You'd be surprised the reaction and results you will get from this kind of professional approach. You're in a tough money market, best of luck with it.
Agreed in my HML days I would never do a deal in NY.
Here is what I required.
2 years tax
LLC not required
Credit report I run.
Criminal background I run
Run through Accurants fraud detection for mortgage lender service I subscribe to.
3 months bank statements.
one page exec summary on the deal.
one page of your history.
clear plan for exit.
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