Applying for a hard money loan, especially for first-time borrowers, can be stressful and overwhelming. To help avoid possible errors, we’ve made a list of the top 3 mistakes:
1. No exit strategy
Lenders want to know how you plan to repay the loan. Examples of exit strategies include: seasoned income, rental income, sell the property, or a plan to refinance back into a conventional loan. Having an exit strategy is highly beneficial for you because it allows you to deeply analyze your situation and determine a viable strategy.
2. Not enough equity
Hard / private money lenders qualify you differently than conventional lenders. Conventional lenders heavily weigh your credit score into their lending decision, while hard money lenders primarily evaluate the amount of equity in the property. Marquee Funding Group can go up to about 70% loan-to-value, meaning that you must have at least 30% equity. For example, an LTV of 70% exists for a property worth $1 million, a $700,000 mortgage, and $300,000 of equity.
3. Not having required documents
To expedite the loan process, it is important for you to have the needed documents prepared. As the required documents vary for each loan type (refinance, purchase, construction, or bridge), we recommend you contacting us to obtain an exact document needs list. This will save you plenty of time and frustration.