The four questions serious lenders are asking right now

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The four questions serious lenders are asking right now

JS Burnett
Real Estate Consultant · Houston TX · Member since 2021 · 122 posts · 92 votes

Every lender worth working with is asking the same things before they fund.
Line item construction cost broken down by trade. Not a GC summary. The actual scope with actual numbers behind every line.
Monthly holding cost calculated honestly including a realistic buffer for overruns. Because the timeline always moves.
A real insurance quote on the actual property. Houston is seeing premiums on older wood frame multifamily that are destroying NOI on deals that looked fine before the quote came back. Get the number before you make the offer.
Primary and secondary exit strategy with current market comps supporting both. One exit is one point of failure. Experienced lenders know that and will ask what happens if the primary plan does not work.
Investors who can answer all four cold get funded. Investors who hesitate on any of them are telling the lender something about how they run their deals.

Which one trips your borrowers up the most?

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Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
6mo

Nice breakdown. I want to see the replies!

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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    6mo

    Nice breakdown. I want to see the replies!

    1Reply
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 503 votes
    6mo

    If a fix and flip project, important to have a line item rehab budget to get to funding approval. I think often that a borrower may not know how to structure a line item budget so can be helpful to work with another investor who's more experienced with flips or a contractor. 

    There are fix and flip programs that will fund up to 90% of the purchase price and 100% of the rehab done on draws depending on the borrower credit score and property location. Borrower credit score is often very important if a fix and flip program as there's greater risk associated with the program due to a higher potential for borrower defaulting on the loan and/or not finishing the project. Insurance quotes are necessary. Other items will often depend on the program and the lender as these programs are generally lender specific with some overlap in program guidelines.

    [email protected]818-770-0340
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  • Kirkland KearsePro Member
    Member since 2022 · 7 posts · 3 votes
    6mo

    Thanks!

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    6mo
    Quote from @JS Burnett:

    Every lender worth working with is asking the same things before they fund.
    Line item construction cost broken down by trade. Not a GC summary. The actual scope with actual numbers behind every line.
    Monthly holding cost calculated honestly including a realistic buffer for overruns. Because the timeline always moves.
    A real insurance quote on the actual property. Houston is seeing premiums on older wood frame multifamily that are destroying NOI on deals that looked fine before the quote came back. Get the number before you make the offer.
    Primary and secondary exit strategy with current market comps supporting both. One exit is one point of failure. Experienced lenders know that and will ask what happens if the primary plan does not work.
    Investors who can answer all four cold get funded. Investors who hesitate on any of them are telling the lender something about how they run their deals.

    Which one trips your borrowers up the most?


     Unfortunately there are many investors do not want to take the time to do the homework necessary to successfully close a clean deal with solid terms. If you ask too many questions, they'll just work with someone who isn't. If you tell them a longer closing time, they will work with someone that tells them 10 and then they run extension after extension. If you tell them the fees upfront, and they look "high" they will work with someone who tells them a lower figure, until they pay for the appraisal, value comes in lower, experience is not there and then they end up closing on a 4pt loan. 

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  • JS Burnett
    OP
    Real Estate Consultant · Houston TX · Member since 2021 · 122 posts · 92 votes
    6mo
    Erik, you are 100% right. It's become the normal to devalue professionals at all levels so that "investors" can make more profits. The irony is that they more they try and DIY for more for themselves the less they make and less time they have to enjoy whatever they do make.
    0Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    5mo
    Quote from @JS Burnett:

    Every lender worth working with is asking the same things before they fund.
    Line item construction cost broken down by trade. Not a GC summary. The actual scope with actual numbers behind every line.
    Monthly holding cost calculated honestly including a realistic buffer for overruns. Because the timeline always moves.
    A real insurance quote on the actual property. Houston is seeing premiums on older wood frame multifamily that are destroying NOI on deals that looked fine before the quote came back. Get the number before you make the offer.
    Primary and secondary exit strategy with current market comps supporting both. One exit is one point of failure. Experienced lenders know that and will ask what happens if the primary plan does not work.
    Investors who can answer all four cold get funded. Investors who hesitate on any of them are telling the lender something about how they run their deals.

    Which one trips your borrowers up the most?


     Agree 100%. We don't want to see $10,000 for flooring. We want to see $10,000 for X sf of XYZ luxury vinyl. Also, we're seeing more and more scopes where total line items are omitted. Just had one signed contract that omitted cabinetry. There's a reason we look for complete scopes and schedules of experience. Nice post. 

    1Reply
  • Frankie VozziBusiness Member
    Member since 2025 · 336 posts · 82 votes
    5mo

    This is spot on.

    The one I see trip people up the most is the exit strategy especially the backup.

    A lot of deals look fine on paper until you stress the exit a bit (rent comes in lower, refi terms tighten, timeline slips), and then the whole thing gets shaky.

    The investors who get consistent approvals are the ones who can show the deal still works even when things don’t go perfectly.

    [email protected]516-888-7750
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