Learn To Be A Fix and Flip Investor: Hard Money Lenders—California Underwriting Guidelines

Thursday, February 23, 2017

Hard Money Lenders—California Underwriting Guidelines

You may be asking yourself what are the benefits to working with hard money lenders? California underwriting guidelines, in short, is one of the main benefits to working with lenders who offer hard money financing.

The underwriting process for any lender is a vital part of securing financing, which even more so true for hard money lenders. California lenders of hard money, in fact, have been so focused on what borrowers have to offer that for a quite some time the underwriting portion of the program was either overlooked or at best sub par.

The reason that the underwriting process has been essentially overlooked in most cases is because the potential value of collateral often overshadowed a borrower’s ability to meet repayment terms. Of course, this is not necessarily the borrower’s fault nor is it exclusively the lender’s lack of foresight rather it is the reality of the real estate market. Hard money financing is often thought of as a borrower’s, investor’s or builder’s saving grace for hard to finance projects and ventures.

Therefore, when both borrower and lender see the light at the end of the tunnel, some important details tend to be overlooked. So, at this point, you may be wondering, what exactly does this all mean when it comes to hard money lenders? California lenders, much like other lenders, have underwriting guidelines that need to be met regardless of the underlying situation. Thus, lenders of hard money also need to meet these regulations or guidelines. The good news is that there is a viable solution to this problem that ensures that everyone’s best interests are kept in mind.

How to Meet Underwriting Guidelines
The clear and obvious solution to this issue that lenders of hard money financing appear to have is simply put—outsourcing. Much like any other business or industry, outsourcing vital components of a larger process can ensure quality and so much more. In this particular instance, outsourcing can be used for a variety of underwriting components. For example, a lender of hard money can choose to outsource the loan package creation, document retrieval, document review, ordering appraisals, appraisal review, closing coordination, final document creation and so on. With that being said, it is still important to highlight the fact that there are some guidelines that simply should not be outsourced such the building of a lender –borrower relationships. For instance, both you as the borrower and your lender need to have a clear sense of one another; this means understanding each other’s character, business or credit history, etc. It is also important for the lender to have a firsthand understanding of your stake in the deal.

Going Beyond Regulations
Lastly, your lender should also make it a point to personally ensure that your collateral is adequate and easy to sell, all the while making sure that you have the ability to meet your repayment terms. If by chance, you feel as though your lender is more focused on your collateral, you may want to take a step back and ask if this is the right lender for you. Ultimately, you want a lender that can help you securing hard money financing and provide you will achievable loan terms as well as a seamless underwriting process.

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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.