Applying for a hard money loan is generally much easier, and requires far less paperwork and administrative hurdles, when compared to applying for a traditional loan through a bank or credit union. Nevertheless, a simpler application process does not mean you will receive instant approval. In fact, there’s a chance your application will be denied. If you are encountering difficulties securing hard money loans in Los Angeles, it could be attributed to one or more of the following reasons.
No. 1 –Not Enough Skin in the Game
One of the most common reasons a hard money loan application is denied by a lender is because the applicant simply does not have not enough “skin in the game.” Meaning, the applicant is seeking 100 percent financing to cover the cost of a fix-and-flip project. As a result, you are basically asking the lender to take all of the risk on the project;therefore, reduces the likelihood of approval. To improve your odds of getting approved for hard money loans in Los Angeles, try to include a sufficient down payment (typically in the range of 20-25 percent) and/or have sufficient equity in the property.
No. 2 – Failed to Provide the Necessary Paperwork
As mentioned, hard money loans generally require far less documents and administrative hassle compared to a bank or credit union. Nevertheless, you still need to provide specific financial documents for the lender to review and properly assess the risk associated with your real estate project. Here are some of the most commonly-requested documents sought by hard money lenders:
- Copy of the most recent appraisal on the property
- Purchase and sale agreement for the property
- Rent roll and a copy of the leases
- Images of the property
- Summary of comparable homes that have been sold recently
No. 3 – Unable to Service the Monthly Payments
Many hard money lenders will typically analyze your earning capacity to ensure you can actually service the monthly payments on the hard money loan, if approved.For example, if you are applying for a hard money loan to purchase a rental property, the anticipated monthly rental income will be taken into consideration. If you are applying for a hard money loan to purchase a rehab project, a hard money lender will typically assess your ability to cover the monthly payments on the loan through your bank statements and/or tax returns.
To ensure that you are able to service the payments on the hard money loan, some lenders may ask you to place an interest reserve to mitigate a risk. In an interest reserve,you will be asked to deposit interest payments that would cover several months in a collateral account so they can draw mortgage payments automatically. In some instances, a lender may even ask for six months of interest payments up front.
Interested in a Hard Money Loan in Los Angeles? Contact PB Financial Group Today
If you are looking to secure a hard money loan for a real estate venture, take action by contacting PB Financial Group today. PB Financial Group is a premier direct hard money, private money and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. To schedule a consultation please contact PB Financial Group at 877.700.3707 or visit www.CalHardMoney.com for further information.
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