Common Reasons Hard Money Loan Applications Are Denied

Common Reasons Hard Money Loan Applications Are Denied

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While hard money lenders do not have the same credit and income requirements you will need for a bank loan, there are still standards in place to protect the borrowers as well as the source of capital. Investors / borrowers who ignore these policies risk having their requests for financing rejected. If you want to submit a successful application for a hard money loan in Los Angeles, avoid the most common reasons for denial.

  1. Issues making monthly payments

    Banks have set guidelines in place for a borrower’s income. Even though hard money lenders are not as strict in this department, a borrower still needs to demonstrate the ability to make monthly payments, whether through savings or a steady income or through the business nature of the cash-out. Repayments are part of the core agreement between lender and borrower, so it is best to have solid repayment plan before applying.

  2. Not enough equity

    Many applicants look for hard money loans in Los Angeles borrowed against equity in a property. In this case, lenders will look at the amount you have financed in the property. If there is less than 40%, applications are usually rejected. The same applies for buyers who want to finance over 70-75% of a purchase. A 25%-35% down payment is usually the standard for approved applications.

  3. No exit strategy

    Investors who want to see a hard money loan application approved should have a short-term exit strategy in place. Most terms end within three years, so investors ought to know how they’ll handle the balloon payment due. Usually, selling the property is the move investors make, but you may have another property you are planning to sell or a plan to refinance. Whatever the case, your exit strategy should be clear and feasible.

Hard money loans in Los Angeles give investors with poor credit scores the opportunity to get financing for properties. If you meet the requirements, you have access to fast cash to put your plan into motion and first step is to contact a reputable and experienced hard money lender such as PB Financial Group. PB Financial Group is one of the leading hard money lenders in Los Angeles and surrounding areas. For further information or schedule an appointment please contact us at 323.935.5555 or visit www.CalHardMoney.com

PB Financial NMLS #357614/DRE #01522495

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Pouyan Broukhim

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