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Brad Anderson

Some key elements we look for when considering funding a hard money loan

When it comes to underwriting loans, we focus on two critical elements: the borrower and the property. Evaluating the borrower starts with running a credit check, which helps determine their financial reliability. A borrower with a history of slow payments, collections or judgements, presents a higher risk, which can result in an adjust the loan terms, such as loan amount or rate.

Additionally, we look for “skin in the game.” If a borrower is asking for a high LTV loan but doesn’t have any capital cover unexpected problems or service the loan, that raises red flags. Experienced borrowers, or those with clean credit histories; typically fare better in negotiations. Prior success in real estate projects can also indicate a lower risk profile.


Equally important is the property itself. We always ensure we have a 1st lien position, like prior judgements or solar liens ( unless its intended to be a 2nd) and limit our loans to 75-80% of the market value . Understanding the property's condition and the scope of needed repairs is crucial. If a borrower proposes a rehab budget that doesn’t align with reality, it may signal inexperience, and we may advise them to opt for a less ambitious project. Verifying details like the ARV through reputable sources, conducting thorough title checks, and physically inspecting the property are essential steps. If everything aligns and makes sense, we move forward; if not, adjustments or cancellations may be necessary.


If you’re considering using a hard money loan for your next project, or saving an existing transaction, give us a call — We're here to help!

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