When it comes to seeking out hard money lenders in California or anywhere else, most of us are too concerned with what we think we need to do to get approved to make sure we don’t do things that will get us rejected.
It’s natural for people to want to focus on what they need to do to make forward progress. It’s what we are all after, and depending on the number of distractions in life, we may need to have laser focus to reach or goals.
However, in the process of locking in that laser focus on the end goal, it is not unusual for people to miss some of the details that hinder progress towards that goal. Do so when you turn in your loan application to hard money lenders in California or anywhere else and your application will end up being denied.
Three Things That Will Get Your Hard Money Loan Denied
As important as it is to focus on the things you need to do right to get approved, you must keep in mind those things that can get you rejected by hard money lenders in California:
• Insufficient down payment or equity: Hard money lenders can get away with charging the high-interest rates that they do because of the increased risk involved. To mitigate that risk, lenders will often require a sizable down payment or that you have sufficient equity in the property; 25 percent is a typical amount. Lenders tend to feel better when they feel you have “skin” in the game too.
• Insufficient income: Hard money lenders want to know you have some “skin” in the game before approving your loan, but they also want to feel confident you will be able to repay the loan. Just saying you’ll pay when the product you are selling explodes and every has to have a piece doesn’t count. The best way to soothe these concerns is to have sufficient income coming in already or with cash reserves.
• No exit strategy: Hard money loans are often shorter; no more than a year to five years typically. But that does not mean your payments are going to be crazy high. It just means you are going to have a balloon payment at the end—which is where many people tend to run into trouble. So when that time comes, it helps to have a strategy for handling that payment. Acceptable exit strategies include selling the property, selling a different property, refinancing with another hard money loan (or a conventional one or a subprime one).
Hard Money Lenders in California Don’t Want To Reject You
Hard money lenders don’t want to deny you. They want to loan you the money you need. It’s why they exist. But if they aren’t careful and approve too many of the wrong types of people, lenders may soon find they have no money to lend.
So do your homework—all of it. Find out why hard money lenders in California will reject you as well as what it takes to get approved. This way you can prepare for everything and ensure you will get what you need.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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.