Proof of Funds For HML?

Question

Hey BP,

Quick question, do most Hard money lenders need the investor to have the property under contract to provide term sheets? I have a client who is in need of hard money but the lenders I work with, need for him to have the property under contract, any advice? I am new in the whole Private RE lending brokering.

Erin Legler · Answer

@Orlando De Los Santos I have never heard that you need the property under contract to get a proof of funds letter for a residential property.  Most are happy to send you a POF letter.  There is a website too that you can go to that will email you a letter and you do not need to use them.  PM me if you need that website.

Ryan Blake · Answer

@Orlando De Los Santos Yeah that is why I stay away from brokered HMLs. They let people rep them up front but don't give much support to their brokers. It is a common problem in the industry.

Orlando De Los Santos · Answer

@Ryan Blake @Jonathan Taylor Smith Totally understandable, No one wants to waste their time running numbers that might not come to fruition, I am currently brokering Hard Money Loans with Lima One Capital and Icon Realty Capital and both told me they needed the investor to have the property under contract before I submit the deals over, and then I have a co-worker of mine experienced RE investor telling me that they don't need to have the property under contract lol

Ryan Blake · Answer

@Orlando De Los Santos

Part of the reason is that hard money loans are asset based. You should be able to get a proof of funds letter once pre-qualified but the terms may vary based on the risk associated with the project. Most HMLs should be willing to look at the property before you get it under contract. They may not give you a commitment but should tell you if it is a deal they would entertain or not.

Jonathan Taylor Smith · Answer

Each HML is different in this regard, but my experinece is that when I was starting out and both new to REI and new to a given HML, getting a Term Sheet and Proof of Funds was more of a touchy matter, since I was an unproven commodity. No one wants to waste time running numbers and providing docs for a property that is still on the shelf. But once I could show experience and had done a deal or two with a the HML, I could call, email or text on any property (under contract or not) and would have Term Sheet and POF within an hour with no problem.

J.T.