Clay Sparkman
One of my long term objectives with this blog is to eventually walk with you through all of the private money loan processes and procedures, from the moment of conception until death (death of course not being a bad thing in my chosen metaphor, but simply meaning loan payoff, workout, or foreclosure).
This post deals specifically with the loan packet submission process (not quite conception, but in the early infancy stages you might say). When working with either brokers or borrowers, it is very important to be specific regarding precisely what items are needed in order to properly review the loan in detail. Presumably at this point, you will have reviewed the loan in concept, via a verbal interview or some form of written summary or submission and would like to take the next step and review a detailed paper (or electronic) packet.
It is also important at this point to very clear with brokers or borrowers regarding how and where and in what form to submit the packet, and if you require a deposit, as we generally do, this would be the time to ask for it.
And so, these are the guidelines used by my company, Fairfield Financial. We have developed these over the years and they are pretty good, but keep in mind that these are only guidelines and that each situation is unique and may require additional underwriting items that are not mentioned here. Also keep in mind that there is an element of style or expectation involved here, specific to the individual lender. Our goal is to attempt to obtain all information that might have more than a negligible impact on the decision process. You want to be thorough, but you don’t want (I think) to ask for every possible imaginable item. (That would make you too much like a bank now, wouldn’t it?)
When submitting a loan proposal, please include:
- Residential loan application (1003) or equivalent (MUST BE SIGNED BY BORROWER)
- Signed and completed Fairfield Disclosure Forms
- Current tri-merge credit report (if loan is submitted by broker; if borrower submits directly, Fairfield will pull report)
- Trio of subject property (or other type of detailed spec summary)
- A good comp set, appraisal, or some other objective and transparent case for value
- Photo(s) (if not included in an appraisal)
- Cover sheet describing/summarizing parameters of loan
- Preliminary Title Report(s) for all properties
- Payment history on all loans encumbering the subject property (or properties)
- Payoff quote on present loan(s)
If borrowing entity is corporation
- Company financials (income statement and balance sheet)
If purchase
- Valid executed earnest money agreement (contract to purchase)
If credit history is rough
- Explanation of circumstances
- Supporting documentation to show status of resolved items
If present loan is in default
- Explanation of circumstances
If raw land or builder ready lots
- Supporting documentation (government correspondence/code) to address development plan and demonstrate likelihood of completing development according to plan
- Copy of zoning documentation and explanation of possible land uses
- Description and status of utilities and access to the lots
- May want signed affidavit from Borrower regarding completion status of lot(s)
If floating home
- Copy of registration
- Recent float survey
- Copy of lease (if slip is leased) or owners certificate (if slip is owned)
If leased land
- Copy of lease on land (or usage permit)
If 2nd or subordinate position loan
- Copies of notes and Deeds of Trust for all superior loans
- Payment histories and statements for all superior loans
- Payoff statements for all superior liens
If construction/rehab loan
- Summary of project
- Builder credentials
- Copy of contractor’s License, bond and insurance
- Detailed line item budget
- Supporting documentation to backup detailed line item bids/estimates
- Plans (if floor plan is new or changing)
- Copies of permits already obtained
If Income Property
- Copies of all leases and rental agreements pertaining to the property.
Our Guidelines:
Region:
Alaska, California, Colorado, Florida, Idaho, Georgia, Montana, Nevada, New York, Oklahoma, Oregon, Texas, Washington, and Wyoming
Loan Amounts:
$50,000 minimum, no maximum
Interest Rates:
10 – 15% on firsts
Term of Loans:
1 – 5 years
Amortization:
Interest only
Broker Fee:
Typically 5%
Other Fees:
Document preparation: $675 to $2,900; Collection account set up: $470 plus $1 for each $1000 of the loan amount; Property inspection: generally $250 to $1000
Pre-pay Penalties:
None
— Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)
Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964. Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.
Tags: hard money investing, hard money lending, hard money loans, loan underwriting, private money investing, private money lending, private money loans
