Avoid These Common Mistakes When Submitting a Hard Money Loan

4 Replies

From an article in the Scotsman Guide, traditional mortgage brokers often make mistakes when submitting hard money loans to hard money lenders. Because traditional brokers are well versed on how a bank lender likes to see a loan package, they often make mistakes when submitting loan files to hard money lenders. These mistakes can often slow down the loan approval process and loans can actually take longer to fund! Make sure you aren’t making these common mistakes in your loan submissions:

  1. Make sure the loan meets the requirements of the hard money lender before submitting.
  2. Tell the story of why the borrower needs a hard money loan.
  3. Don’t be tempted to overload the lender with too much information.

Read the entire article from the Scotsman Guide at the link below. What are some other common mistakes you’ve seen traditional brokers making in their hard money loan submissions?


http://www.scotsmanguide.com/Commercial/Articles/2015/01/Steer-Clear-of-Hard-Money-Mistakes/ )

Posted by Corey Curwick Dutton, Hard Money Lender

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Thanks for your comment Ken V. What would you say about the best way to submit a hard money loan? 

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I work for a Hard Money Lender in California-- @Ken Vesely said it well;

Introduce yourself and go straight into the deal. You don't need a long story-- we just want to get to the point.

Example: If it's a cash out refinance we want to know:

 1. Where is the property is located? What's the property address?

**The closer the property is to the lender the better your odds of funding, because we'll have a better understanding of the market. Also, you'll probably get a better rate if the lender is willing to finance you because guys like us don't want to lose a good loan in our "backyard" to competition.

2. When did you buy it? What did you pay for it?

3. What do you think it's worth?

**Be honest with yourself: A lot people I talk to over-value property(s) especially if they own them-- there is a behavioral economics hypothesis called the endowment effect that states, "people ascribe more value to things merely because they own them" it's true. Also, because we're asset driven lenders we're going to assign a conservative value.

4. What is the loan amount are you looking for?

I believe the author of the article mentioned most private lenders wont extend themselves beyond 70% LTC/LTV. Our fund won't go higher than 65% and I would say unless the real estate is really good you'll need to bring at least 35% cash into the deal.

5. What is the purpose of the loan?

**This is important, you don't need a story for your loan but you do need a purpose. The purpose of the loan helps us determine how to best structure your loan, your loan term, and possibly your exit strategy (which you should have).


Also, I can't emphasize the importance of doing your due diligence when it comes to your lending source-- find a lender who does what they say they're going to do and build rapport with them. A borrower we've built a good relationship with, who we know is accountable and honest, is much easier to make a loan for-- even if it's not something that's a great fit for us.

Hope this helps,

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