Private Money Lending 103 - How to Apply for Your Loan
Updated: Jan 7, 2019
Welcome back! If you've been following along in our Introduction to Private Money Lending educational series, you've already gained a much more robust understanding of what makes up private money lending, and even where it gets its name. This week, we'll be covering specific loan parameters, what our lenders take into account during the approval process, and how to apply for a private money loan with Geneva Lakes Funding.
As you've learned, private money lending involves lending money on the future value of real estate. When it comes to evaluation, hard money lenders look for the overall profitability of the project. They consider the viability of the construction or rehab timeline, what is known as the ARV, which stands for after repair value, and the true 30-day contract price of the property. Here at Geneva Lakes Funding, when we receive a loan request via email, website or phone call, our next step is to interview the borrower. For each loan, we are looking for the following:
The borrower's full name, email, and phone number(s)
Whether the property is a purchase or a refinance
What the address of the subject property is
What the purchase price of the property is
How much work is needed, in a monetary amount
What the exit game plan is
How much money the borrower will make
How experienced the borrower is
Whether or not the property is under contract
How much money the borrower is putting in
Once we've interviewed a prospective borrower, Geneva Lakes Funding will compile a set of rough numbers for the borrower to review. If the proposal is agreeable to the borrower, we move forward, at which point the borrower will pay a non-refundable valuation fee that goes towards the hiring of an agent for the loan's broker price opinion, or BPO.
The agents Geneva Lakes Funding works with for BPOs all have at least 15 years experience valuating properties. Once the value of the property is established via the BPO, the final numbers are adjusted and given to the borrower to review. If all parties are satisfied, then we have the borrower order a title from one of our approved title companies, all of whom are experienced in hard money lending and its specific scope of borrowers.
Once the title comes back and is reviewed, the loan details are sent to Geneva Lakes Funding's attorney to prepare the loan documents. Once compiled, the attorney sends the loan package to the title company so they can finalize the numbers, documents, and distributions, including the construction hold-back. Then, we arrange for someone from Geneva Lakes Funding and the borrower to meet in person to sign final documents. The typical loan approval process normally takes less than 14 days from start to finish and we endeavor to fund our loans within 2-3 days after the title work is finished.
When applying for a private money loan from Geneva Lakes Funding, a good rule of thumb for borrowers to keep in mind is that they aim to have 20% - 25% of the loan amount available in cash/liquid assets. We also encourage borrowers to remember that closing costs are typically 8% - 10% of the loan amount.
Thanks for reading - we look forward to hearing your thoughts below!