Private Money
Learning about Private Money
The institutional lending environment is getting harder and harder. The subprime arena is nonexistent. We may have the loan product you’ve been looking for. Private money loan programs give most consideration to the value of the property. The borrowers financial profile is then analyzed against the equity position to determine if the loan is a viable transaction. To find out if your scenario fits this niche here is what you will need to prepare:
Executive Summary – All loan submissions must include an executive summary that provides the underwriter a strong understanding of the loan request. Key points that need to be addressed include:
- The loan amount being requested and an explanation of the payoffs, cash out, and use of funds.
- The value and a description of the collateral. It would be prudent to also explain how the value was determined, as well as when the borrower purchased the property and for how much.
- The terms of the loan request. Do they need a 1 year loan or a 40 year loan, do they need the loan to be without a prepayment penalty in order to meet their exit strategy? What loan terms are necessary to accomplish their goal?
- Define how the borrowers will debt service the loan. Does the property produce income, do they have the ability to make payments via their business or employment?
- What is the exit strategy? Do they intend to refinance out of this loan or sell the property to payoff the note? In a brief but thorough explanation define the steps they will take to pay off this loan.
- Be sure to explain the reason they need this financing. Typically private money loans are a temporary to solution to their financing needs. Give us the story behind the request, why do they need this loan program? Property is in probate, property is in mid construction, they don’t qualify for institutional financing because…etc.
1003/1008 & Credit Report – This must be prepared for all borrowers, even if the guarantor is a corporate entity (ie. Corporation, LLC, etc.)
Appraisal or Color Photos - Providing a current appraisal for us to review is ideal. If a current appraisal is not available you can send color photos of the property or an older appraisal. This will help us evaluate accurately the key item of consideration in the loan request, the collateral. Investor may require an updated valuation to determine current property value.
Supporting Documentation – If the income, or the assets, or any other type of documentation will be necessary for a reliable response please include it. If you feel it is important chances are so will we and to provide you a reliable response its best to submit it upfront.
