Hard money has a lot going for it. Despite some very distinct negatives that need to be considered prior to borrowing, hard money’s positives definitely make it a worthy option for certain types of financing needs. Among the many things to love about hard money is an extremely easy application process.
If you have ever applied for a residential mortgage, you know just how difficult it can be to arrange high value loans. Take what you know about residential mortgages and apply it to commercial property loans that could be worth millions. Imagine how difficult arranging such a loan would be. Fortunately, it is not as difficult as it sounds.
The Hard Money Application Process
Applying for a hard money loan is much simpler compared to conventional lending. Let us say you wanted to apply with Actium Partners in Salt Lake City, UT. The first step would be preparing a proposal you would submit with your application. The proposal briefly outlines why you are requesting the loan, what you plan to use the money for, and how you intend to pay it back.
The next step is to complete the actual loan application. This is no different than completing any other type of application. You fill in your personal information followed by general information about the loan and its purposes.
Finally, you gather any necessary documentation to support your application. Let’s say you’re looking for a loan to buy a piece of investment property. You would include documentation proving your purchase contract. You might also submit documents proving the value of the property.
Approval and Underwriting
Hard money’s many benefits include a limited need for additional documentation. Provided all your paperwork is in order prior to submitting an application, you’re not likely to receive requests for further documentation. The lender will use the information you have provided along with an appraisal of the property to make an approval decision.
Assuming approval is given, you probably won’t need to do anything else. Underwriting is accomplished using the information you have already submitted. Only in rare cases will a lender call and ask for more. Ironically, it all goes back to the very reason hard money is known by its given name.
It’s All About the Asset
Hard money lenders can get away with a simple and streamlined application process because they do not need a whole lot of documentation to approve an application. They are not so much focused on the borrower’s credit score and history. They don’t need bank statements and proof of income. They do not even need profit and loss statements. What do they need? A high value asset.
Going back to the previous example, a borrower attempting to buy commercial property in Salt Lake City would offer that property as collateral on the loan. Actium only needs to know that the property in question has sufficient value to cover the amount being borrowed.
Credit Worthiness Isn’t a Question
Where conventional lenders leave no stone unturned in the quest to learn every detail about a borrower’s finances, hard money lenders don’t dig nearly to the same extent. In short, credit worthiness is not a question for hard money lenders. Their main priority is asset value.
This partially explains the need for significantly less documentation. It also explains how hard money lenders can complete the underwriting process in days. Meanwhile, it can take a bank months to finish underwriting.
There is a lot to love about hard money. If you have commercial financing needs that could be addressed with hard money, you owe it to yourself to take a look.
