Mortgage brokers like you know that today it is extremely challenging to find loans for borrowers. With many banks unwilling to lend on investment real estate, the private money lending market has established itself as the best solution for well-qualified buyers who are looking to buy properties which promise to be lucrative for them over time. Here are the six steps that you need to follow to close the loan and collect your fee:
Build a relationship with a good private money lender. While banks sit on their hands, private money lenders have investors who are extremely motivated to get their money working for them. The best mortgage brokers have at least one private money lender relationship that they can count on. Emulate them to grow your business.
Qualify your buyer. Just because a buyer wants a loan and thinks they have a great deal does not mean that they are qualified to borrow money. Ensure that they have the ability to make a sizable down payment and that they have the wherewithal to make the loan payments, even if the investment does not go exactly as planned.
Qualify the property. While private money lenders are more flexible than bank lenders, they are very sensitive to loan-to-value (LTV) ratios. Most lenders will not go over a 65 percent LTV ratio.
Manage your borrower's expectations. While some mortgage brokers take the risk of overpromising a low rate, doing this if your client needs private money will cause them to walk away. Let them know the types of rates and the origination fees that are prevalent in the market so that they know what to expect and are not surprised.
Prepare a package. You will need to package the loan and tell it’s story so that the private money lender will understand why the buyer will be motivated to make their payments. If your buyer has an imperfect credit score, you will also need to tell the buyer's story.
Close the loan. Once you submit the underwriting package and appraisal, you can typically expect to close the loan quickly within a couple of weeks or sooner. Because a private money loan is usually short-term money, keep a good relationship with your borrower since odds are that he or she will return in a year or two for a permanent refinance loan!
