How Long Does It Usually Take to Close Non-Traditional Funding?

Question

I’m learning about different financing options beyond banks.

For those who have used alternative lending, what was the average timeline from application to closing?

Just trying to better understand the process.

Denise Supplee · Answer

I agree with what @Erik Estrada said, the only thing I would add would be to factor in any additional documentation or investor approvals your specific lender might require, as that can sometimes extend the timeline a bit beyond the averages Erik mentioned.

Mike Klarman · Answer

The answer is it all depends.  There's moving parts to closing these loans.  Some things directly in your control, some not.  I've seen lazy appraisers need tons of revisions and the appraisal takes weeks.  I've seen title not start the title work when the request was sent, but only started it after a follow up was sent.  I've seen borrowers drag their feet getting items in, I've seen the lender drop the ball and let things sit.  Also, is this a repeater.  Repeaters are easy, especially if the repeat is fresh.

In a perfect world, appraisal and title get ordered and going.  In that 7 - 10 days we're waiting on those things the borrower gets everything in.  Those title and appraisal come back.  If numbers work, get insurance.  Then underwriting which is the real examination.  That takes 2 - 5 days depending on the pipeline and then out of UW you go to committee for final vote.  And I've seen it where UW and Committee did not agree.  Committee is asking for a new doc, or offer revised terms, I've seen lots of variables get screwy.  But 3 weeks is very efficient, 4 weeks is good, five weeks is not abnormal, at week 6 it's sloppy or there are issues out of your control.

Leona Du · Answer

Non-traditional lenders usually move faster than banks, though timelines vary. For earnest money, at Duckfund we fund EMD within 48 hours with no collateral, which lets investors secure the deal quickly and gives them time to complete due diligence and raise the funds for closing.

Chris Seveney · Answer

The other major factor is your accuracy of information and communication. There will be information you need to provide the lender and some of them are assumptions. If they are close then it should be the timeframe mentioned (3-5 weeks). If it is off it can be longer. For example we had a borrower claim the property would appraise for $500k and would generate $80k in STR income. It appraised at $460k and found to generate around $50k in STR income - that threw everything out the window and basically had to rewrite the entire loan.

Stacy Raskin · Answer

DSCR loans generally fund in 21-30 days for a 1-4 unit and 30-45 for a 5-8 unit.

Hard money lender with a large company that specializes in that will generally be 7-14 days minimum.

What needs to be considered is matching the right type of property with the right loan.

For example a DSCR loan will not work for a property that has health and safety issues or deferred maintenance that the appraiser marks in the appraisal report. Examples of potential problems are holes in walls or floors. The issues will have to be fixed before funding.

Also, the investor has a lot to do with the timeline of funding if you are working with the right mortgage broker or lender. It's important to get the requested documents and information back in a timely manner as that will usually hold up the next step of the process until the information is received.

Happy to connect to discuss further.

Erik Estrada · Answer

It really depends on the kind of "alternative loan"

NON-QM typically takes 30-45 days to close on average. Hard Money loans are faster, usually 12-21 days since they are underwriting the collateral and the borrower's creditworthiness/experience. Commercial loans usually take 60-90 days depending on how large the asset is, appraiser availability, and title.

How Long Does It Usually Take to Close Non-Traditional Funding?

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