Many borrowers who want to start applying for hard money loans can often be confused on where to start. Before you just start applying, it is important to establish both what you already have and what exactly you will need. First let’s take a look at what a hard money loan is.
What is a hard money loan?
Hard money loans are asset-based; they are loans secured by real properties.
Lenders are usually concerned with the value of the property and the borrower’s equity in the property.
What Will I Need to Establish?
Find a Reliable Lender
Before applying for a hard money loan, it’s important to find a lender that you can trust and that will work with you. Instead of jumping to the first lender you see, do some research on what lenders have to offer.
What does their past experience look like? What do their reviews say? If you’re having trouble finding a lender, we recommend Hard Money Bankers. Currently operating on the east coast, Hard Money Bankers works with borrowers to meet their needs regarding hard money loans.
Know About the Property You Want to Invest In
It should go without saying that you shouldn’t take out a loan unless you know what you want to buy with it, but sometimes that is overlooked. However, since hard money loans are borrowed from individual lenders, it is important to have as much information about the property you’re using the loan for.
This not only builds trust between you and your lender but will also save you money in the long-run.
Have a Financial Plan
Developing a financial plan before applying for a loan is extremely important. Since most lenders only lend 60-70% of what you need, you must prove how you will be making the extra 30-40%.
In addition to a financial plan, you should also have personal documentation ready to show to your lender as proof of financial history. This will prove that you are in good financial standing to keep up with the loan.
Personal documentation can include W2’s, credit card statements, paystubs, etc.
Know Your Exit Strategy
One of the most vital pieces of information needed for applying for a hard money loan is having an exit strategy. An exit strategy is the method in which you will be paying back your loan.
You should include this when presenting your project to your lender not only to build trust, but also because you will more likely be granted the loan if you have an exit strategy in place.
About Hard Money Bankers
Hard Money Bankers is a full service and self-funded private hard money lending company providing fast and flexible financing for real estate investors. They are currently operating in Delaware, New Jersey, Pennsylvania, Washington DC, Virginia and Maryland.