Applying for any type of loan can be stressful, and one of the best ways to avoid that unnecessary stress is to be well prepared. Knowing what to expect and how to best present your request can not only reduce your stress level but can increase your chances of getting hard money loans.
The first item that you need to understand is that a lender is only going to consider the loan request if the amount is within the industry standard 65-75% loan to value range. This means that the loan cannot exceed 75% of the value of the property. With that in mind, you need to be prepared to pay any additional cost above that 75% in cash. Understanding the LTV concept allows you to ask for a reasonable loan amount and also prepares you for the down payment which will be required. You will appear very well prepared and professional when the lender mentions the down payment amount and you tell the lender that you already have those funds available.
Another important question that you need to be ready to answer is about your exit strategy. Every lender wants to know what your plan is for the property and how you plan to achieve your goal. This could be completing a renovation and then renting the property or it could mean selling it after a renovation. But this is basically you explanation about how you plan to be able to repay the loan.
The final strategy is to seek several hard money loans in an effort to have multiple offers to choose from. This is the same method that you would use to select any service provider and it allows you to shop for the best terms and overall cost of the loan. Be sure to calculate any loan origination fee, funding fee or early payment penalty that might be included in the terms of each offer to determine the true cost of each option.
There is a lot of information that you need to understand before securing hard money loans. But if you are willing to invest the time, then you can secure multiple offers. This allows you to select the best loan offer to meet your needs. In addition, preparing to answer the questions of the lender about your exit strategy and down payment funds is a good opportunity to fine tune your business plan for the project. Planning for the down payment and your exit are both smart business decisions that will help you to land a loan as well as increasing your potential profit at the end of the deal. It can be tempting to rush into a purchase when you find a great property with a lot of potential. But investing a little time in the planning phase will provide a great foundation for the project and better potential for your return on investment.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.