Want to Ensure Your Private Money Loan Is Approved? 4 Common Submission Mistakes to Avoid
Updated: Jan 7, 2019
Now that you've discovered just what private money lending is, you're likely excited to have found a resource that offers expedited funding for your real estate investment property. Great! Ride that wave, get excited, and get ready to dig in and get rehabbing!
But, before you jump into the submission process, be sure to set aside a bit of prep time. We've compiled a few of the most common private money lending submission mistakes below that will help you avoid pitfalls and errors that may seriously inhibit your ability to receive funds in a timely fashion.
1. Choosing the Wrong Lender
There is a whole slew of unethical lenders, scams, and other unfortunate characters out there to be on the lookout for. Working with the wrong team or individual can not only lead to a bad headache but also a catastrophic loss (for those beginning their fix-and-flip career).
We suggest researching a variety of lenders. Get to know their lending process — what do they require for approval and funding? How long have they been lending, and what is their satisfaction rate? Search out reviews, discover their background, and investigate just how transparent they are about their business and their process. Ultimately, you want to choose a lender that has the funding to support your investment, that practices full disclosure in terms of their loan process and rates, and ideally, one that strikes you as a person you'd truly like to do business with.
2. Skipping the Pre-Approval Process
You may think you're a sure thing. However, if you begin the process of house hunting without pre-approval, you may be met with some skepticism along the way. Take the time to meet with a trusted private money lender like Geneva Lakes Funding before you begin browsing. Once you get pre-qualified, you can shop with confidence. In fact, Geneva Lakes Funding will send you a proof of funds letter to show that you are a serious buyer.
3. Under or Over-Estimating How Much You'll Borrow
Private money loans are typically structured as balloon loans, with small payments each month that goes toward just your interest. Then, at the end of the loan prior, the full amount is due.
If you've drastically over-estimated the cost of your property and renovations, you'll be paying much more than necessary at the end of your loan term. If you've under-estimated, you may be unable to complete the project if any unforeseen home renovation situations arise. Either way, your loan will be due at the end of the term.
To avoid either of these situations, speak with your contractor to gain accurate estimates prior to submitting your loan application.
4. Signing Before You Read The Fine Print
Never ever sign a document which you haven't fully read, or don't fully comprehend.
Many financial documents tend to favor the lender, which means you may be agreeing to certain terms that you're unaware of, that could be harmful to you in the long run. Keep an eye out for re-payment penalties that penalize early payment of your loan. Also, be sure that you're aware of the interest rates, repayment schedule, and final payment date prior to signing.
To learn more about how to obtain a private money loan for your future real estate endeavor, email us at email@example.com, or call (262) 222-6400 to schedule a consultation.
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