How to Get a Hard Money Loan Approval: 6 Steps

For people looking for a Nashville hard money loan there are a few steps involved to finding the best one and being approved.

This type of loan is a short-term asset-based loan that typically lasts for about 12 months, however the term of funding can be extended for up to 2-5 years. A hard money loan is secured by real-estate property and instead of being financed by traditional loan providers like financial institutions or credit unions, this type of loan is funded by private investors. In order for someone to keep in accordance with the loan conditions, they must submit regular monthly payments of either the rate of interest on the payments, or principal from a large payment (balloon payment) at the end of the loan term as well as the interest.

Here are 6 steps to securing a Nashville hard money loan:

1. Finding lenders

There are various methods to finding a trustworthy lender for a hard money loan. One simple method for people to discover a local hard money lender is through researching this type of lender online and searching specifically for their location. There would most likely be specific providers in the results who are looking for borrowers.

An additional way for someone to discover a hard money lender is by joining and attending their real estate investor club locally. These types of lender clubs are present in the majority of cities and are also typically well-attended by hard money lenders seeking out prospective consumers to connect with. If people struggle to find hard money loan lenders at these types of meetings, then asking other real estate investors if they know of any reputable lenders is another good way to seek them out. The borrower should then start contacting and communicating with the lenders on their list, asking questions and being thorough in communicating with them in order to establish a good financial relationship, which ultimately will help them find the best hard money loan lender.

2. Searching for and finding the best property

Finding the right property for the loan depends on the real estate investment objective. People searching should make sure to carry out the necessary research in assessing a potential residential or commercial property. For example, if the borrower’s objective is to “Fix & Flip” the property; they should understand and gather knowledge on the area, and take full advantage of the potential of added value, they must think about the various comparables when searching, like amount needed to invest in fixing the home, space for improvements, the time it will take, and how much value will be added to the property in the future.

If the purpose of the hard money loan investment is to buy a new property to rent out then variables for this objective should be thought about and examined well.

It’s important to have a procedure for successful investment, and the property you choose to invest in is taken into account by the hard loan lender that you apply with.

3. Have a precise and well written application

When applying for a hard money loan, it is very important that the borrower takes time to conduct and write a concise and clear application. Getting the numbers, facts and figures correct is critical to being approved for a loan with the chosen lender. A big factor in the success of securing the funds the borrower needs is the preparation of the executive summary and application. It must contain all precise information required by the lender and project a well thought out strategy so that the lender is confident in giving out the loan.

As with most loans, a credit check is more than likely conducted and if there are any credit issues within the report, it is highly recommended to explain these in the application summary.

4. Factors

Lenders take into account a wide range of compensating factors when it comes to loaning funds for real estate such as, credit, capital, experience, Cross Collateralization, and property. Therefore, it is highly important to have these in good standing or outline the strengths in certain areas.

5. Contractor estimates and the scope of work

The team that will be involved in the development or overseeing of the property is important to a hard money loan lender. Outlining contractor costs, bids and estimates and being organized and precise in these summaries is a sure fire way to having the lender put trust in the borrower. Specific breakdowns of the budget and timelines can really help in being approved for the loan.

6. Provide pictures of the property and market analysis

When applying for a hard money loan for a residential or commercial property, a lender likes to see documentation like photos of the property that’s being invested in. A self-conducted analysis of the market and area is also a sufficient piece of evidence into a lender approving loans.