Hard Money Loan Origination Process

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When it comes to hard money, the loan origination process can sometimes feel overbearing and complicated, but it doesn’t have to be. At Pacific Equity & Loan, we are dedicated to not only providing great deals for our borrowers, but also insightful information. Therefore, we have broken down the typical loan origination process for any real estate investor to originate their loan seamlessly for fast funding.

Preparation

For any lender that you work with, there will be several stages you need to go through in order to process your loan. The key to a clean and fast loan process is preparation. Having all the required documents and information correct and ready beforehand allows you to go through each stage without any hiccups.

Pre-qualification

The first stage of the loan process is pre-qualification. Prequalification is the stage in the process where you will need to put together a list of items such as FICO score, liquid reserves, investing experience, source of down payment, exit strategy, and property information (type, location, purchase price, ARV, etc.) Once the lender reviews all of this information, they determine if you are pre-approved and ready to move on to the next stage of the loan process.

Loan Application

After you have been pre-approved, the next stage in the loan process is the loan application. The loan application can either be completed paper-based or electronically. With the loan application, your lender might ask for additional documents such as welcome documents, your purchase agreement (for acquisitions), your ID, your insurance contact, your bank statements, the scope of work, and track record.

Loan Processing

Now that you have submitted your loan application and all the relevant documents, the application is now in the processing stage. During this stage, your lender’s processing team reviews your application for completeness and accuracy. If any mistakes are found, or any fields are not completed, the processing team will have to send the application back, slowing down the process and delaying you from getting funding. The processing team will also need to order the title report to check any liens or judgements to be cleared and homeowner’s insurance policy.

Loan Underwriting

Once the application is completed and approved by the processing team, it is time to move on to the underwriting stage. In the underwriting stage, the lender assesses the risk of the loan. The underwriting team reviews all aspects of the loan such as your finances, credit, and the value of the property. However, hard money lenders focus more on the property than you personally. Contrary to conventional mortgage loans from the bank, rather than focusing on your personal merits, hard money lenders focus on the merit of the deal.

Escrow and Funding

After the loan documents have been completely approved, they are ready to be sent to escrow. After escrow has reviewed the documents, they then send over the settlement statement to balance with your lender. Once the settlement statement is approved by your lender and seller(if it’s acquisition) then escrow will schedule signing with you. Once you sign the loan documents and wire your portion of costs to escrow, you are now ready to receive funding for your project!

Closing

After all parties signed the loan documents completely, your lender will wire the funds to escrow. When escrow receives all parties’ executed documents and funds, they will record the deeds and disburse the proceeds to you, the seller, the lender and any vendors involved. So, there you have it, a complete guide to the hard money loan origination process. While it may seem tedious and stressful, it doesn’t have to be. As long as you are well prepared with all the necessary documentation and information, you will go through a seamless and quick process. 

 

At Pacific Equity & Loan, our dedicated staff is here to make your loan origination process better, faster, and cheaper. Click below to apply now!

Citations

  • 7 stages in loan ORIGINATION – lending and Leasing Software. (2021, April 08). Retrieved April 20, 2021, from https://www.decisivedge.com/blog/7-stages-in-loan-origination/

  • “How to Prequalify For a Hard Money Loan | What Your Lender Needs To Know!” YouTube, uploaded by Sean Pan Real Estate Investing, 11 July, 2020, https://www.youtube.com/watch?v=GICDUPAFtVo 

  • https://www.hardmoneyfirst.com/wp-content/uploads/2014/08/Hard-Money-Defined-and-the-Loan-Process.pdf

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