In a full loan application for one of our Colorado hard money loans we require:
Materials required depend somewhat on the type of loan and type of property.
For a rehab loan on a single family, the following items would likely be required:
- Completed loan application form
- Rehab items/budget (Schedule of Work – we can provide a template, other formats may also be acceptable)
- The real estate purchase agreement contract (and all disclosures, addenda and amendments)
- Acceptable proof of past rehab experience (items may vary).
- Copies of recent tax returns & IRS form 4506T which allows us to obtain an official copy form the IRS for verification [income amounts are not important, primarily verifying identity]
- Under certain circumstances, we may require special inspections or reports (e.g. suspected structural or mold issues, well or septic system etc.) prior to a loan commitment decision. Sewer scope reports are often required for homes built prior to 1982 or built in certain areas. Asbestos tests and report are commonly required, but depend on the scope and type of repairs/renovations. Additional documents are likely to be required if the property will be occupied at the time of purchase or there is a non arms length transaction.
At some point prior to a loan commitment we need to meet all signers on the loan and take a picture of each driver license (or State ID) and do a property walk through.
For a pre-approval application (for a pre-approval letter), we simply require a pre-approval application and id verification through an person meeting.
(Good Funds Lending, LLC provides hard money loans in the Colorado Denver Metro area)
For the pre-approval application, we will perform a cursory evaluation of your financial estimates for the project (purchase/acquisition cost, rehab budget, after repair value), and your level of experience and your answers to few other questions. If we believe there is a reasonable likelihood that we would make a loan based on the information provided, we will inform you that you are pre-approved. If approved, and you request a pre-approval letter (Often pre-approval letters are submitted with offers on properties; however, some borrowers may choose to complete a pre-approval application after the property is under contract). A pre-approval is not a guarantee that the loan will be approved or made.
For the full application you provide more details regarding the project and your experience. We more carefully review the borrowers and project. We evaluate the current and after repair value of the property and closely review the expected repair/rehab costs. We examine credit history (via a “soft pull” working with the potential borrowers using a service like CreditKarma.com or a “hard credit check”) of all human borrowers. We do not look for a minimum credit score, but primarily focus on your credit activities/events in the last two years. Prior to making a decision on a loan commitment we typically do a property walk through with one of the borrowers.
At some point prior to a loan commitment we need to meet all human borrowers on the loan and take a picture of each driver license (or State ID) and do a property walk through.
We can work with borrowers to utilize a “soft pull” credit history service such as CreditKarma.com (and avoid hard credit checks).
It is important to us to know if potential borrowers are in currently in financial trouble. We are a hard money lender, so our loan decisions are primarily based on the underlying value of the property (“hard asset”); However, even as hard money lenders, we do consider recent credit related behavior among other factors. We will typically review credit history for each human borrower. We are not looking for a minimum credit score, but will evaluate recent credit history focusing primarily on the following aspects:
- Related recent bankruptcies
- Related recent foreclosure proceedings
- Recent history of late payments
- Currently owed payments that are past due
We look at the each loan as a whole package including the asset, the borrowers and the market.
Yes, if we pre-approve the loan after reviewing a free pre-approval application (remember a pre-approval is not a loan commitment).
As a direct private Colorado hard money lender we conduct our own valuation analysis (for residential properties) and we are not required use a 3rd party appraiser as hard money lenders that have outside investors may be required to do. There is no additional charge for the valuation/appraisal for residential properties, as we perform our own internal valuation for our internal purposes only and we do not make any representations or warranties related to our valuation. For properties for uses other than residential (e.g. office, retail, industrial), we typically do require a 3rd party appraisal, which the borrowers are required to pay for.