Four Tips to Speed up Getting a Real Estate Investment Loan Approved

Time is money, and a goal of any borrower is to get their loan request funded as soon as possible.

How and to whom you present your loan request is critical to streamline the process and improve the chance of your loan being approved.

Four tips to expedite your loan request and loan funding:

1. Pursue the Right Lenders

 There are two lender categories: 1) conventional lenders (i.e., banks, credit unions, life insurance companies, conduits, etc.) and 2) private or hard money lenders. Conventional lenders are heavily regulated but provide the cheapest form of debt. A private money lender is a private mortgage fund or group of individual investors which have more flexibility but are at a higher cost.

Several factors determine which lender category to target: timing, loan type, property type, condition, leasing status, and the creditworthiness of the borrower.

For example, if the loan needs to close fast (in two weeks), then it’s not a loan request for a conventional lender. Alternatively, if it’s a request for a long-term permanent loan with a creditworthy borrower on a new, fully-leased apartment, and you have plenty of time to close, then a conventional lender is appropriate.

Does the loan have to close fast? Is it a construction loan, a short-term bridge loan, a rehab flip loan, a permanent loan? Does the borrower have credit issues? These are a few questions that will help to decide the right lender category.

Know the active lenders in your specific market and the types of loans they specialize in.  Here strong lender relationships are important. A mortgage broker with extensive connections with multiple lenders can be valuable in finding the right lender.

2. Know Your “Hot Button”

 A hot button is the most important issue regarding the type of financing you are requesting, i.e., timing, loan size, rate, fee, easy process, etc.

Once you decide your hot button, direct your effort to lenders that will entertain the specific type request. For example, if you insist on the largest loan possible at the expense of timing and paying higher financing costs, etc. then the hot button is high leverage.

3. Present Loan Request in an Executive Summary Format

Once you have identified the potential lenders that may be interested in your loan request, document the request in a brief executive loan summary (no more than 2 pages).

A concise loan summary that is easy to understand will move your deal to the top of a lender’s loan request list. This applies to both conventional and private money lenders.

See link for an example of an executive loan summary template to use when making your initial pitch to a lender for a loan request.

4. Provide Necessary Documentation at the Right Time

The initial introduction of your loan request is an executive loan summary with only salient facts and no additional information. This applies to both conventional as well as private money loan requests.

Do not overwhelm the lender with documentation on the initial request. The key is to include only the primary information in an executive loan summary. Make it as easy as possible for the lender to decide if your loan is one to pursue.

Once the lender has expressed interest, provide additional detailed information in the form of a loan package including; financial statements, bank statements, tax returns, borrowing entity information, purchase agreement, preliminary title report, photos, etc.

See link to “helpful hints” on what to include in your loan package for a typical conventional loan once the lender has expressed an interest in pursuing your loan.

After a lender has reviewed your loan package and decides to move forward, they will issue a letter of interest or an application documenting the loan terms and third party reports required to get final loan approval.

Conclusion:

 To expedite your loan request, know your hot button, lender category and the lender type you are targeting. Once the potential lenders are identified, send your request in an executive loan summary format with only the main facts.

Remember, brevity and clarity is needed to assemble the best loan request along with key business relationships to target the right lender and expedite the funding of your real estate investment loan.