Property investors have a reputation as being hard money’s best customers. Investors love hard money and bridge loans because they are easy to access, quickly processed, and pretty straightforward in their terms. Even the application process tends to be pretty easy.
All of these things combined make hard money and bridge loans more attractive for property investments than conventional financing. As for how an actual loan application is submitted, that depends on the lender. I am guessing most lenders do things electronically these days.
Actium Partners is a hard money lender based in Salt Lake City, Utah. In addition to the Beehive State, Actium also writes hard money and bridge loans in Idaho and Colorado. They say there are four things every investor needs to apply for a loan:
1. Property Details and Photos
Let us start with the understanding that the vast majority of all hard money loans are obtained by investors looking to purchase new properties. We are not talking residential mortgages or small business loans here. We are talking about loans investors plan to use for obtaining office buildings, retail spaces, warehouses, and other commercial properties.
The first thing an investor needs to apply for a hard money or bridge loan is information on the property itself. Lenders want details. They want to know everything they possibly can about the property in question. They also want photographs.
Lenders ultimately appraise targeted properties on their own. But detailed information with a loan application helps a lender better understand whether it is even worth it to take a look.
2. Proof of Down Payment Funds
Hard money and bridge loan LTVs can run from 50-75%. A borrower will need the remaining balance as a down payment. At the time of application, most lenders require proof of down payment funds. Before they put any effort into an appraisal and drawing up loan documents, they want to know that the borrower has enough cash on hand to cover the down payment.
3. Basic Financial Information
Even though hard money lenders do not dig too deeply into borrower financial history and credit, they still want some basic financial information at the time of application. They want this information in order to be sure that the borrower is in a stable enough financial situation to actually buy the property in question.
Someone who doesn’t truly have the means to afford a commercial property is not a good risk. Someone who intends to buy a property but has no money to repair and maintain it isn’t a good risk, either. It just makes sense for a lender to understand the borrower’s current financial position.
4. A Viable Exit Plan
Last but not least is an exit plan. An exit plan is the borrower’s plan to repay the loan at its maturity date. Bear in mind that most hard money and bridge loans are structured as interest-only loans. That means monthly payments cover interest only. The principal is due on the loan’s maturity date.
An example of a common exit plan is conventional financing. The investor utilizes hard money or a bridge loan to complete the acquisition. In the months following, he arranges conventional financing in order to pay off the original loan on time.
Submitting these things with a loan application guarantees the application will at least be looked at. An application without all four would probably be considered incomplete. If additional information or documentation is ever required, the lender will make that known. In most cases though, the things discussed in this post are enough.
